Apr 15, 2015

Pay Discrimination Myths

via Competitive Enterprise Institute

Equal Pay Day is coming up on April 14. That means it's time for false statistics and legal claims from groups pushing for more rules and red tape governing employee pay, such as the proposed Paycheck Fairness Act.

On April 10, Linda D. Hallman, Executive Director of the American Association of University Women (AAUW), sent a mass email containing two false claims. The first alleged that "women have to work almost four months longer than men do to earn the same amount of money for doing the same job."  This is a fundamental misinterpretation of a statistic that itself is obsolete and years out of date.

It is based on a much-repeated and much-debunked statistic that women make 77 percent as much as men do. That statistic was obsolete in 2013, when former Chief Labor Department economist Diana Furchtgott-Roth noted:

The 77 percent figure is bogus because it averages all full-time women, no matter what education and profession, with all full-time men. Even with such averaging, the latest Labor Department figures show that women working full-time make 81 percent of full-time men’s wages. For men and women who work 40 hours weekly, the ratio is 88 percent.

Anther reason women earn less than men on average is that women work fewer hours on average than men even when they work full-time. As Washington Post fact-checker Glenn Kessler observed in February 2013, government data show women work fewer hours than men, which explains much of the apparent pay gap:

[S]ince women in general work fewer hours than men in a year, the statistics [such as this one] used by the White House [to push for passage of the proposed Paycheck Fairness Act, discussed at this link] may be less reliable for examining the key focus of the legislation — wage discrimination. 

Family responsibilities also play a role. Furchtgott-Roth cites a 2005 study that found: “There is no gender gap in wages among men and women with similar family roles.” In addition to being more likely to seek part-time work, women are also more likely to have gaps in their employment history and to enter lower-paying fields, she notes, and “a 2009 report for the Labor Department, found that these factors account for most of the pay gap.” In any event,  employers don’t pay women 23 percent less for the exact same work. If they did, employers could (and some would) crush their competitors just by hiring only women, who would cost less to employ, to reap a huge cost advantage. But no major employer has ever done so.

The AAUW's second false claim dealt with the proposed Paycheck Fairness Act, which would greatly expand federal regulation of how employers set pay, including making it harder to use legitimate factors "other than" sex in setting pay, as I explain in this law journal article.

The AAUW claims this bill would just “update the Equal Pay Act of 1963, finally bringing the law in line with the nation’s other civil rights laws.” But in reality, as we have explained in the past, the bill is much more radical than that. It would mandate things that judges have never considered appropriate under federal civil-rights laws, like allowing recovery of unlimited emotional-distress and punitive damages even for unintentional violations.

The Paycheck Fairness Act also rigs the criteria for determining whether pay is discriminatory, by largely ignoring factors that might provide an innocent explanation for why a male employee is paid more than a female one—such as the dangerous and unpleasant nature of the job. Most jobs with high mortality or injury rates, like lumberjack, fisherman, cab driver, or coal miner are overwhelmingly male, while low-risk clerical jobs are performed predominantly by women. As Furchtgott-Roth  explains: “[T]he bill’s language omits experience, risk, inflexibility of work schedule, or physical strength, factors that increase men’s wages relative to women’s. The bill does not include effort, so there is little leeway to promote those who work harder.”

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