First 100 Days: The mirage of pay equity

January 21, 2009

Diana Furchtgott-Roth-Debate– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –

President Obama takes office facing the challenge of high expectations—of ending the recession, fixing the nation’s financial and housing problems, and withdrawing combat troops from Iraq within 16 months.

In addition, feminists expect him to end inequality in pay between men and women.

To this end the Senate will consider two bills, both passed by the House in early January, the Paycheck Fairness Act and the Lilly Ledbetter Fair Pay Act.  Their stated purpose is to reduce alleged discrimination against working women by making it easier for them to sue their employers.

If passed by the Senate, they will be sent to President Obama, who has said that he would sign them.  But whether these bills would actually help women to get hired and to advance in the workforce is dubious.

They would increase the risks and costs of hiring women, making it more likely that men rather than women would be hired.

The Paycheck Fairness Act would allow women to sue for unlimited compensatory and punitive damages under the 1963 Equal Pay Act. Current law does not allow for punitive damages.

Also, it would encourage class actions by requiring workers who do not want to participate to opt out, rather than opt in, a radical change from conventional law and practice.  Employers would have to collect data on the race, sex, and wage of all workers and give it to the Equal Employment Opportunity Commission.

The Lilly Ledbetter Fair Pay Act would overturn a 2007 Supreme Court decision, Ledbetter v. Goodyear Tire.

The Court upheld an Eleventh Circuit [Court] decision that Title VII of the Civil Rights Act of 1964 requires suits to be filed within 180 days (300 in some states)  of an alleged “discriminatory pay decision.”  Under Title VII “discriminatory pay decisions” mean employers’ decisions about pay made with discriminatory intent.

However, feminists say that women should be able to sue for discrimination beyond 180 days of receiving a paycheck—any paycheck, not just the first—because it can take longer than 180 days for employees to ascertain whether discrimination is occurring.

Under the Equal Pay Act, women can sue within two or three years of receiving allegedly discriminatory pay, because the Act does not require “discriminatory intent” for redress, just discrimination. Women have to show only that they are paid less than men for doing the same work.

Sponsors of the bills predict that they will raise women’s pay. On January 8, Senator Hillary Clinton, the sponsor of the Paycheck Fairness Act, declared: ” It is disgraceful that four decades after the Equal Pay Act was signed into law, women in this country still earn only 78 cents on the dollar. The Paycheck Fairness Act is an attempt to right this historic wrong and I am proud to reintroduce it today.”

That 78 percent figure is bogus because women’s and men’s occupations and hours of work differ. Comparing women and men who work 40 hours weekly yields a wage ratio of 87 percent — before accounting for different education, jobs, or experience, which brings the ratio closer to 95 percent (click here for Dept. of Labor’s full report). Percentages of 87 percent and 95 percent are less dramatic — and less likely to persuade Congress of the need for new laws.

America leads the world in job creation, and almost 60 percent of women work. Even in the current recession, the unemployment rate for adult women, at 5.9 percent, is lower than that for adult men, at 7.2 percent.

Women are closing the pay gap because their education is increasing. They earn well over half of all B.A.s and M.A.s, and half of professional degrees in law and medicine.

Lower pay can reflect individuals’ choices—by men and women–about field of study, occupation, and time in the workforce.  Those who don’t finish high school earn less.  College graduates who major in humanities rather sciences have lower incomes, and more women than men choose humanities majors.  Until these choices change, women’s incomes won’t rise, no matter how many bills are signed into law.

Rather than helping women, these bills would hurt both women and men by increasing the costs of hiring and reducing job creation in the midst of a recession. President Obama may well sign these bills, but the consequences won’t meet expectations.

For previous columns by Diana Furchtgott-Roth, click here.

22 comments

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Protecting all employees from unfair and unsafe practices would be better. High salaries discourage hiring by employers and threaten the survival of companies. This is something unions and activist groups have been slow to recognize. So I completely invite the collapse of the auto sector just so the causality is clarified. A lower salary for work of equal value will sometimes mean that a woman gets the job rather than a man. That is a competitive advantage in terms of office work. In terms of physical and skilled work, we should let the market decide. Companies that treat their employees inappropriately deserve to be displaced by the competition. But for sure we need good solid laws to help promote worker safety and education – for everybody.

Posted by Don | Report as abusive

There is discrimination. I keep finding discriminatory attitudes in myself. However, I’m very worried about simplistic attempts to enforce equality. Statistical trends among groups are very real; only a rabid ideologue would deny that. When two people have the same title and the same work, one may be a lot more competent and productive than the other. I’m not sure it’s a good idea to have politicians managing industry from the back seat.

Posted by Pete Cann | Report as abusive

Should men need to worse off in every walk of life so that our society can be called equal? Isn’t the very definition of equality biased against men? Plenty of tears are shed if women are a few percentage points behind men but none if men lag women by even double digit percentage points (case in point being the education system).

Posted by Andy | Report as abusive

“When two people have the same title and the same work, one may be a lot more competent and productive than the other.”

Just about whenever people can in the industry, they use their ability as much as possible to carry out their personal prejudice or they work to benefit themselves.

Laws are like traffic lights. Discrimination should be illegal, not tolerated. It’s not a hard problem if we draw firm lines. If someone is not qualifies for a given title and position, don’t give them the job.

Posted by Matea | Report as abusive

I agree. I support Obama, but he would be wrong to sign these bills. Employers that underpay women create an opportunity for competitors to steal them away with better pay packets. The market will punish these employers. In this case, the market is the best route to justice. These bills would be well-intentioned distortions that would provide little or no positive effect.

Posted by Winchester73 | Report as abusive

I think the rule of law has pushed this issue as far as it can without destroying what it seeks to fix. Is there discriminatory practices at work? Yes. The good old boys clubs certainly still exist. But wide general attitudes towards women in the work force have changed. What remains needs to be changed by women on a case by case basis. This legislation is a bludgeon when what is needed is a scalpel. Stereotypes may be over-reaching generalization … but generalizations are not formed in a vacuum … perhaps the lingering generalizations are better viewed as constructive feedback … be sure that you are not propagating those views with your work ethic, encourage more of your peers to do the same and watch as those generalizations fade because they no longer reflect the truth.

Posted by Juls | Report as abusive

The market does not work well for pay equity. It is too difficult presently to know what your colleagues are earning and whether you have a case. Making a case is too often a career-ending move. I would prefer a more active approach to the problem, such as adding pay equity to what the CPAs audit and certify every year in public companies.

Posted by Jill | Report as abusive

Ms. Furchtgott-Roth spends most of her column explaining why wages for women could legitimately be lower. This is an ideological argument that completely misses the point of the Lilly Ledbetter Fair Pay Act. Lilly Ledbetter won in court. She proved that she had been unfairly denied equal pay for equal work. Goodyear’s very expensive corporate lawyers surely brought up every relevant point that Ms. Furchtgott-Roth raised in her column. That’s what they are paid to do. Each point was disproved by a preponderance of the evidence to the satisfaction of the jury. That’s why Goodyear lost. The Supreme Court overturned the verdict on a technicality….suit not filed in a timely manner.

The issue is not education or experience or high salaries. It’s equal pay for equal work. Not higher pay for the guys who go out and have a beer with the boss once a week, or who golf with him on Saturday. The Supreme Court’s decision doesn’t recognize that companies do everything in their power to subvert the market for labor. It’s hard to know if you are being paid less when your company forbids people to discuss or compare their salaries. Goodyear didn’t do the right thing because they were afraid that they would be inundated with other lawsuits. That indicates that they *know* there really is a problem. The question is whether they fix it or not. Business can complain about labor laws all they want, but as long as some continue to treat employees dishonestly, or force them to work under unsafe conditions, all can expect more regulation.

Posted by Tom | Report as abusive

As a woman working in a male dominated industry, I was a victim of blatant gender discrimination, I feel these bills need to be signed in order to send a strong message to employers. Many employers don’t even consider HOW they determine salaries for men and women. Many employers don’t even know these laws exist or they’re simply ignored. When I questioned my “salary” and “job description”, the response was “Are you married? How many children do you have?” In other words….are you the “head of a household”. This issue is REAL and women need to know that they are being paid fairly. I currently have a friend who found out she is being paid 12% less than her male counterpart. Why? There is no explanation. Both were hired at the same time, for the same position, with the same experience. So why the disparity? Maybe he’s a better golfer…yeah that must it!

Posted by LCM | Report as abusive

When someone is offered a job, they’re told what they’ll have to do, and what they’ll be paid to do it. If anyone (man or woman) agrees to do it for $1 / hour, and someone else barters it to $1.5 / hour, the first person isn’t being cheated. They’re getting what they agreed to.

Posted by Drewbie | Report as abusive

Thanks to “correcting gender bias”, at our local high schools, girls now have a much higher average GPA than boys. Girls outnumber boys 3 to 1 to 3 to 2 in the honor rolls at all local high schools. They outnumber boys in the NHS too.

You might think in a situation like this that the schools would be working to fix this gender inequality. But no, they also have special “girls only” science and math clubs and other “girl only” groups and programs to enhance opportunities for girls. Even though all of their data shows that boys are now the disadvantaged gender.

Meanwhile, the boys continue to suffer terribly. This gender balancing game looks to be something of a con job.

Posted by FFN | Report as abusive

“[These bills] would increase the risks and costs of hiring women, making it more likely that men rather than women would be hired.”

Only among companies who already want to pay women less, across the board. A company that is secure in its equal treatment of all employees wouldn’t bat an eye at these bills.

A better solution might be to require companies to make everybody’s salary public. Think about what would happen. Even if you just anonymized it with some basic demographics, then at least we could see the totality of what’s going on, and not rely on a random survey of 15,000 people to come up with the 78% number.

a job discription is listed and along with it the pay.
four people apply for it. In one year an additional need is found to hire another person. They get hired for a different pay. But the original pay is still listed. It doesn’t matter what the gender both should be paid the listed pay. Thats fair, right and equal. Because water coolers do not exist at most of these jobs how is one to know? Should we blame the lack of water coolers??? People will be so hungry in the next year that they will take what is offered……equality doesn’t have much clout when starvation is at the door. Welcome to 21st Century America.

Posted by Patricia Horrocks | Report as abusive

Congress doesn’t do well with complex problems. That’s part of the reason they have a 9% approval rating. This is a complex problem. It’s fine to say “equal pay for equal work”, but what if one person has more tenure? What if one person is working an undesirable shift?

The best way to approach this is for a non-partisan commission to give this issue the deliberation it deserves, and then give Congress an up or down vote on their recommendations – just like the Base Realignment and Closure commissions.

Personally, I would like to see much more transparency in pay and benefits, including those for executives. These days, the excesses of executive compensation are a much larger problem than gender pay equity.

Posted by Steve | Report as abusive

Sex Discrimination is immoral, and has no place in society. I know I know, economics professors keep saying that economics has no moral considerations.

But this is about fairness, morality and decency.

Posted by Hasta | Report as abusive

Makes me not want to hire women now because the chance of lawsuits. As a small business owner, I can’t afford this chance.

Posted by Vince | Report as abusive

The Paycheck Fairness Act and the Lilly Ledbetter Fair Pay Act does not assume choices in education or a humanities major or science major, it is not about that. It is equal pay for the SAME JOB AND SAME OCCUPATION! Other variables such as length of time at the job or performance would have to be considered individually, but not a blockage to this important legislation. To say that “women’s incomes won’t rise”, is cynical,not practical. Your assumptions are off course!

Posted by Sarah Wilson | Report as abusive

Vince — You won’t be sued if you pay people equally. Were you only hiring women so that you could pay them less?

If you had any idea how hard it is to win a discrimination case, you wouldn’t worry. You’d have to be blatantly underpaying a woman to lose a case, or probably to be sued at all. Juries do not sympathize all that easily with people who file discrimination cases, and lawyers lose a fortune if they file a suit that has no chance.

Posted by Maggie | Report as abusive

“If someone is not qualifies [sic] for a given title and position, don’t give them the job.”

Suppose I’m the weakest performer in my department. Then the company goes bankrupt. I need a job. Would I now rather be underpaid or unemployed?

Posted by Pete Cann | Report as abusive

I have had many women working for me in the past. They were 10% of the work force, but 90% of my problems. In most cases with laws like this, if the man and women had the same qualifications, I would hire the man. With the man, at least I could be in my office alone with that person. With a women, my policy has always been to have a third party long because of possible sexual harassment claims.

Posted by Dan | Report as abusive

This is another feminist myth. Check total hours worked to pay – they wages are far more equal than first appears.

Posted by Norm | Report as abusive