52: Equal Pay For Women

Are women paid less than men?
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Do we really have an equal pay for women issue in the U.S. that requires fixing with more laws or is this just another political sacred cow?

The Republican National Committee conference speech by Ivanka Trump surprised a lot of people. The idea of equal pay for women and mothers and affordable child care isn’t something I remember hearing Trump talk about. Not that I pay much attention to the circus show know as the Presidential Race. When the choice is between two clowns you’re going to end up with a clown. Maybe one clown is a bigger liar than the other, and while one should be in jail, the other should not be allowed near the nuclear launch codes. At the end of the day we’ll have an embarrassing incompetent egomaniac in office.

With all this talk about equal pay for women you might think that there aren’t any laws making pay discrimination on the basis of sex illegal when in fact it has been against the law since 1963 when Congress passed the Equal Pay Act.

Do we really have an equal pay for women issue in the U.S. that requires fixing with more laws or is this just another political sacred cow?

Occam’s Razor & the AAUW:

In a Forbes article by Tim Worstall, he quotes an argument from a post by Mark Perry on Carpe Diem. Mr. Perry is a scholar at American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

Perry says:

“We have roughly 150 million people in our workforce, about half of them female. And there are pervasive claims out there that women are paid 23% less than men.

You’d think we’d be able to find a few matched pairs to demonstrate this factoid.

As a matter of fact:

If there were such ubiquitous gender wage disparities in violation of federal law, why are there not extensive investigations by the Department of Justice or the Office of Civil Rights? And why isn’t there a cottage industry of law firms specializing in representing women who are victims of the supposed pervasive gender discrimination, the way there are hundreds of law firms representing mesothelioma victims who were exposed to asbestos on the job?

Occam’s Razor (this is is a problem-solving principle and a technique to to guide scientists in the development of theoretical models). Occam’s Razor should lead to the conclusion that there are no such investigations because there’s no examples to make.

Perversely perhaps, maybe the false “77 cents on the dollar” narrative is actually perpetuated by the total lack of any evidence that any employers actually pay women 23% less than men for the same job. After all, it’s better to keep those mythical violations very vague, ambiguous, and undocumented as a way to keep the myth alive, like very rare sightings of Bigfoot.”

On the flip side, the American Association of University Women (AAUW) has a report published in the Spring of 2016 saying the pay gap is real and that it also impacts mothers to a greater degree. It also provides statistics saying the gap is greater for minorities. They show the pay gap by state, with DC at 90%, the least discrepancy, and Louisiana with the greatest discrepancy at 65%. I’ve put link to the report in the show notes.

Overview of Equal Pay Act of 1963 and other laws:

As I’ve already mentioned, the Equal pay Act of 1963 already exists and it requires you to pay men and women the same for the same work in the same establishment. The jobs don’t even have to be identical just “substantially equal”. Job content determines whether jobs are substantially equal, not job titles.

You can’t pay unequal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment.

Furthermore, Title VII of the 1964 Civil Rights Act outlawed discrimination against women and minorities in all aspects of employment, including hiring, promotion and compensation. Additional protections came with the 1978 Pregnancy Discrimination Act; the 1991 amendments to Title VII, which boosted penalties for discrimination.  In addition, for more than 40 years two major federal agencies have been dedicated to fighting labor-market discrimination: the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance.

Pay differentials are permitted when they are based on seniority, merit, quantity or quality of production, or a factor other than sex. These are known as “affirmative defenses,” and it is the employer’s burden to prove that they apply.

In correcting a pay differential, no employee’s pay may be reduced. Instead, the pay of the lower-paid employee(s) must be increased.

To supplement the Equal Pay Act of 1963, Congress passed the Lilly Ledbetter Fair Pay Act of 2009 which amended the Act by overturning the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., which severely restricted the time period for filing complaints of employment discrimination concerning compensation. It basically made each pay check a violation so the statute of limitations doesn’t start running until the last paycheck instead of when you hired the employee and set the wage.

But even that is not enough according to our masters and now they have proposed the Pay Check Fairness Act. This Act would further amend the Equal Pay Act in the following ways:

•It changes the exceptions to equal pay by limiting a wage rate differential based only on education, training, or experience. I’m not sure it that means the skills differential goes away or not but definitely the effort and responsibility factors go away.

•It changes the bona fide factor defense saying that it will only apply if the employer demonstrates that such factor: (1) is not based upon or derived from a sex-based differential in compensation, (2) is job-related with respect to the position in question, and (3) is consistent with business necessity. It also would make defenses inapplicable where the employee demonstrates that: (1) an alternative employment practice exists that would serve the same business purpose without producing such differential, and (2) the employer has refused to adopt such alternative practice.

  • It would revise the prohibition against employer retaliation for employee complaints and make employers who violate the law liable in a civil action for either compensatory or (except for the federal government) punitive damages.
  • It also class action suits to include individuals as party plaintiffs without their written consent.
  • And finally, it authorizes the Secretary of Labor to seek additional compensatory or punitive damages.

How about that! This will solve the problem, for sure!

What other smart people say:

Maybe the real answer is that we do have a gap but not due to discrimination: According to Claudia Goldin Henry Lee Professor of Economics at Harvard University published a research paper in the American Economic Review in 2014. This is an excellent piece of work and I highly recommend you read it.

She says that:

“A better answer, I will demonstrate, can be found in an application of personnel economics. The explanation will rely on labor market equilibrium with compensating differentials and endogenous job design.”

Endogenous means having an internal cause or origin. In essence, she’s saying the gap is a function of the marketplace and the jobs themselves, not sex discrimination.

She says that government does not have to be the answer:

“The answer may come as a surprise. The solution does not (necessarily) have to involve government intervention and it need not make men more responsible in the home (although that wouldn’t hurt). But it must involve changes in the labor market, in particular how jobs are structured and remunerated to enhance temporal flexibility. The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours. Such change has taken off in various sectors, such as technology, science and health, but is less apparent in the corporate, financial and legal worlds.”

June O’Neill – Wollman Distinguished Professor Of Economics at the Zicklin School of Business, and Director Of The Center For The Study Of Business And Government; says that Women in the workplace don’t face rampant pay discrimination. She says the gender gap shrinks to between 8% and 0% when the study incorporates measures such as work experience, career breaks and part-time work.

I don’t believe there is a problem of the scope that the activists and politicians would have us believe. After all, this is what they do, invent issues, divert attention and promote their own agenda. I’m sure there have been and are current instances of disparate pay based sex discrimination and no amount of legislation will extinguish 100% of it. It isn’t the proper role of government to intervene in the voluntary exchange of labor.

Conclusion:

Is there an equal pay gap problem in the U.S. that needs to be addressed by more laws, stricter regulation and greater enforcement or is the gap due to non-discrimination circumstances?

Pay discrimination on the basis of sex has been illegal since 1964 thanks to the Equal Pay Act, and further supported by Title 7 of the 1964 Civil Rights Act, the 1978 Pregnancy Discrimination Act, the 1991 amendments to Title 7, and the Lilly Ledbetter Fair Pay Act of 2009.

And since that isn’t enough to solve the problem the Pay Check Fairness Act is being promoted.

But, according to many Professors, the pay gap isn’t caused by discrimination. What do you think?

About the author, Thomas

I have 20 of years insurance industry experience in C-level management, focusing on all aspects of workers compensation, risk management, loss control, employee benefits, HR, payroll and professional employer organization (“PEO”) operations. Currently, I am the owner and CEO of Humanly HR, and founder and host of SmallBiz Brainiac; a podcast providing employer intelligence to small business owners.

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