The Paycheck Fairness Act & the 77 Cents Myth

Last week (USA Today article, WorldatWork Public Policy Perceptions post) the Obama Administration announced a renewed push for the passage of the Paycheck Fairness Act, a change to federal wage and hour laws which would, among other things:

-Make it more difficult for employers to defend against gender discrimination claims by altering the standards for this defense,

-Allow for uncapped punitive and compensatory damages, and

-Change class action suits from "opt in" to "opt out", so that workers are automatically made members of a class action suit unless they actively choose to be excluded.

In addition, the Justice Department and the EEOC have announced their intent and commitment to step up enforcement efforts with respect to pay discrimination charges.

These regulatory changes and efforts are being presented as an important and necessary response to the persistent problem of pay inequality, as illustrated by the constantly quoted statistic that women earn 77 cents for every dollar that men do, which is served up as indisputable evidence of widespread pay discrimination.

But is it really?

In her post 77 Cents and Gender Discrimination: The Wrong Conclusion, my Compensation Cafe colleague Stephanie Thomas explains why the "77 cents" statistic can't be due to gender discrimination.  In fact, as Stephanie explains, research done by Francine Blau and Lawrence Kahn, whose 2007 article is the original source of the "77 cents" statistic, concludes that all but a gap of $0.09 per hour can be explained by non-discriminatory things: experience, chosen occupation, etc.

In examining their analysis and conclusions, and looking at the kinds of things that were not considered there (overtime hours, shift premium, etc.) Stephanie opines that the unexplained (and possibly due to discrimination) portion of the wage gap could likely be even less than $0.09. 

My take away?  Wage gap: Yes.  Wage gap due to widespread discriminatory practices by employers: Probably not.

And yet, the Paycheck Fairness Act places employers squarely in its sights as The Villain in the wage gap tragedy.

Are we pushing forward major regulatory changes, which place additional burden on employers during a tenuous economic recovery, based largely on passions whipped up by an inaccurately cited and potentially misleading statistic?  I hope not, but it's looking that way to me.

What about you?

Comments

[Kelly]

I don't understand why the government is trying so hard to effectively "trap" employers. How does this help anyone? I thought we wanted employers to hire people, not be put in a position of having to pay huge fines because some DOL employee made the decision that there is pay discrimination within a company. Do they really think the employer will be in a position to hire people after being stuck with fines? It doesn't stimulate the economy if employers chose to offset some or all of the cost to pay fines into their product pricing.

I keep saying - It's no wonder companies are taking jobs acorss the border and overseas.

[Nancy Hess]

The dialogue and debate around this issue is healthy and much needed. There are so many pieces to the puzzle (about the 77 cent myth) but what comes first to my mind is a recent article, that I cannot put my finger on but will post if I do, about the effects of paternity leave in the Scandinavian countries. The gap in pay has nearly been closed in those countries where men are encouraged to take leave. With so many single head of familes, the increase in the need for elder care, and the bad economy which makes family care that much more difficult, we might consider strategies to better spread the wealth.

[Paul Weatherhead]

Yes, Virginia, there IS a Santa Claus. Its the litigation lawyers lobby. They know its easier to rally new litigation laws around a gap of 23 cents than to rally around a gap of 9 cents.

[Jamie Davis]

Ann,

Good post.

This is a tricky question to answer because the prevailing social mores in the U.S. discourage discussion of politics in most social contexts.

But I think the key to understanding this issue is to acknowledge (gasp) that there is a powerful ideological group which is attempting to shift our focus from "equal opportunity" to "equal outcome".

I commend you for bringing the facts of the matter into plain view. When the facts don't matter to those pushing the agenda, their hidden agenda will be in plain view as well.

[Ann Bares]

Nancy:

Interesting factoid about the impact of men taking paternity leave on the wage gap. I'm surprised that just the one factor would have that much of an impact.

Paul:

Exactly right. That's why it's important to get the truth out there - which is why I wanted to call attention to Stephanie's outstanding post and analysis.

Jamie:

Very good points. How does that saying go? ... we're entitled to our own opinions but not our own facts...

Thanks all, for reading and taking the time to comment!

[Ann Bares]

Kelly:

You're right to note the connection between the additional regulatory burdens we lay on employers and job creation. One hopes that our representatives in Washington won't lose sight of this (but I'm not feeling optimistic...)

[odszkodowanie]

interesting publication