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Good Riddance to the Paycheck Fairness Act – Pacific Research Institute

Good Riddance to the Paycheck Fairness Act

Republicans in the Senate have successfully blocked the Paycheck Fairness Act. That is something to celebrate in 2011 because the Act had little to do with fairness. It would have empowered the federal government to regulate compensation and work arrangements in private businesses.

Supporters lament that Congress has missed a chance to correct “persistent wage discrimination,” which feminist militants charge that American businesses have perpetrated against women. Their argument assumes that widespread wage discrimination is actually a problem in this country, and that only the federal government wields the appropriate weapon to defeat it. As savvy Contrarian readers will recall from previous columns, both these assumptions are false.

The Equal Pay Act of 1963, Title VII of the 1964 Civil Rights Act, and the more recent Lilly Ledbetter Fair Pay Act of 2009, all prohibit wage discrimination on the basis of sex. Women’s rights activists claim that these laws do not sufficiently protect women, citing the gap between men and women’s average compensation as proof. The facts indicate otherwise.

The Department of Labor’s own 2009 study concluded that the “differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.”

Study after study reveals that men will consistently choose higher pay over other considerations such as flexible hours, workplace safety, job security, and career flexibility. Women are significantly less likely to prefer money to these things. Men also work 8-10 more hours per week than their female peers, and are less likely to leave the workforce altogether or go part-time to care for family members. Common sense and fairness dictate that these men should be compensated for their longer hours, higher risk, and more experience.

The call to fight nonexistent wage discrimination is a cleverly veiled attempt to force businesses and taxpayers into a statistical charade. A simple glance at the damage this bill would have inflicted on American business reveals the extent of the overreach. The Paycheck Fairness Act would have put the burden of proof on employers to prove that pay differences were a direct “business necessity,” whereas current law requires that companies prove such differences in pay are not “sex-based.” This nebulous “business necessity” clause would have substantially decreased flexible work opportunities for women, as employers would be hesitant to offer unconventional work and compensation arrangements to their employees.

In order to avoid potential lawsuits, businesses would increasingly turn away from pay increases based on merit or workplace performance, and instead opt for compensation schedules based on seniority and job description. In effect, this legislation and the abundant lawsuits inevitably to follow would have made private compensation much like that in union or government workplaces. The Paycheck Fairness Act would have required all companies to submit the salary, race, country of origin, and gender information of their employees to the Department of Labor, complete with a detailed explanation of any or all compensation disparities.

Those are onerous requirements, particularly in tough economic times. Furthermore, no salary schedule or government formula based on experience, education, and job description alone can ever predict the true value of an employee. This bill would have severely limited American workers’ ability to negotiate their salaries and bargain with their employers to get what they are truly worth in market terms.

Americans overwhelmingly support fairness and just compensation in the workplace. Only a very small percentage, however, favors more government intervention, at the expense of our freedom and economic ingenuity. Stopping intrusive and counterproductive legislation is a good start, but not enough. In 2011 and beyond, Congress should take positive steps to curtail government intrusion and expand economic freedom.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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