The Paycheck Fairness Act Is Based on Myth

April 3, 2014

The Senate's Paycheck Fairness Act begins with the myth that: "Despite the enactment of the Equal Pay Act in 1963, many women continue to earn significantly lower pay than men for equal work," says Diana Furchtgott-Roth, director of Economics21 at the Manhattan Institute.

While it is true that average wages for women are lower than average wages for men, the disparity is due to a number of reasons:

  • First, women choose different occupations -- often ones that are less risky and more pleasant. Companies pay loggers, for example, more money because they are doing dangerous and dirty work. Men tend to be employed in these jobs.
  • Secondly, 25 percent of employed women work part-time, and others take time off when they have children.

When these two factors -- choice of job and time in the workforce -- are considered, studies demonstrate that women and men earn practically the same amount.

Currently, the law does not allow employers to pay equally-situated men and women different salaries. First year medical residents, for example, are paid the same, whether male or female. But the Paycheck Fairness Act seeks to impose equal pay for different jobs.

  • The bill would require the Equal Employment Opportunity Commission (EEOC) to collect data from employers on workers' pay, classified by race, sex and national origin.
  • Employers would only be able to justify differences in male and female pay on the basis of education, training and experience -- and only if those factors were due to "business necessity." For example: A supermarket manager could not be paid more for his college degree if the government decides that a college degree is not instrumental to supermarket managing.
  • Moreover, the bill requires women to opt out of class action lawsuits, not opt in. We can expect a huge influx of class action suits, as women will be included unless they specifically opt out.
  • The bill also establishes punitive damages for any employers who violate the law and are found guilty of discrimination (currently, employers only owe back pay). One third of punitive damages usually go straight to trial lawyers.

American employers will be weighed down by burdensome regulations and litigation threats, which only discourages hiring.

Women are already protected against discrimination by the Equal Pay Act and can sue within two or three years of receiving what they claim to be discriminatory pay. The Act does not even require showing discriminatory intent, just that they were paid less for the same work.

Source: Diana Furchtgott-Roth, "'Paycheck Fairness' Will Lead to Fewer Paychecks, Less Fairness," Real Clear Markets, April 1, 2014.

 

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