Tuesday, November 16, 2010

When paycheck fairness is destructive and unfair

June O'Neill, an economics professor, writes about a very damaging law, called the Paycheck Fairness Act (PFA) working its way through the Senate. As O'Neill reminds us, we already have quite a few laws on the books that, since 1963, have made it illegal to pay men and women differently for the same job. Most of the disparity that remains between men's and women's pay can be traced to the difference in how they approach their jobs.
Why do we need still more legislation? The reason, say the bill's sponsors, is that women earn 77% as much as men, according to the Bureau of Labor Statistics. But this figure refers to the annual earnings of full-time, year-round workers. It doesn't compare comparable men and women, and it doesn't reflect that full-time men work 8%-10% more hours per week than full-time women.

It also doesn't reflect what research of mine and others have shown: Men typically accumulate more continuous work experience and therefore acquire higher productivity in the labor market. In fact, the gender gap shrinks to between 8% and 0% when the study incorporates measures such as work experience, career breaks and part-time work.

The most important source of the gender wage gap is that women assume greater responsibility for child-rearing than men. That influences women's extent and continuity of work, which affects women's skills and therefore wages. In addition, women often seek flexible work schedules, less stressful work environments, and other conditions compatible with meeting the demands of family responsibilities. Those come at a price—namely, lower wages.
But feminists and their stooges in Congress don't like to acknowledge such basic truths. And so they want to pass this deleterious law.
The PFA ignores research showing that factors other than discrimination explain the current gender wage gap. The bill would force employers to raise women's pay by sharply reducing their ability to defend what they believe is a justified differential in pay based on merit.

Under the existing Equal Pay Act, an employer charged with gender discrimination in pay can defend himself or herself by offering evidence that the differential is based on nondiscriminatory factors such as work experience and education. But the PFA limits the use of these bona fide factors by requiring that employers demonstrate that they are job-related necessities.

The PFA also empowers complaining employees to propose alternative methods of determining pay that, if accepted by courts, would presumably be imposed on employers. This unprecedented shift in bargaining power would lead to endless lawsuits.

So would the PFA's changes to the rules governing class-action lawsuits. Under the Equal Pay Act, workers are included in class-action suits only if they opt in. Under the PFA, they would be included automatically—just for being women in a firm that is being sued. And the act provides for compensatory and punitive damages, apparently without limit.

A particularly ridiculous provision would authorize grants to "eligible entities"—supporters of the bill like the American Association of University Women—for training women in negotiation skills. Men are excluded. But if women are the equal of men, why do only they need such training?
Now think of what piling such ridiculous measures on employers will do to our employment numbers. I know that liberals like to ignore unintended consequences of their righteous regulations, but we've learned to our distress over the past few years how those consequences can translate into high unemployment numbers. If you make it more expensive to hire people and force businesses to spend money in defending endless lawsuits, is that going to help the unemployment picture?

What this law does is take illiteracy about the statistics and ignorance about the law to pass something that sounds nice, but will actually be destructive to our economy.

Just because a nice-sounding name like "Paycheck Fairness" is slapped on a bill doesn't mean that the law is necessary or fair.