The "Commonsense" Bill and Its Nonsensical Implications

The Paycheck Fairness Act is being heralded as the "commonsense" bill we need to finally achieve gender pay equity. President Obama said it, and others have echoed the sentiment. But is it really common sense?

From an equality perspective, it seems pretty common sense that "similarly situated" men and women should be earning the same salary. On the discrimination front, it makes sense that women - and men - who believe they are being discriminated against in terms of pay have some recourse.

But when you take a closer look at how the Paycheck Fairness Act will change the way businesses compensate their employees, there are some pretty nonsensical implications...

Let's assume that John and Jane have identical characteristics (education, work experience, etc.) except for gender. ABC Company makes offers of employment to John and Jane on the same day, for the same position, for the same starting salary: $45,000. Jane accepts the offer, but John negotiates the salary, and ends up with $50,000. Under the current equal pay laws, there's no problem; John is earning more because he negotiated and Jane did not. Makes sense, right? Under the Paycheck Fairness Act, ABC Company would be guilty of gender discrimination.

Here's another example. Assume that Sam and Sally have the same education, work experience, etc., and are both hired by WidgetCo on the same day. WidgetCo sets Sam and Sally's starting salary at $2,500 more than they were making at their previous job. Sam was earning $37,500 at his previous job, and Sally was earning $36,000; their starting salaries at WidgetCo are $40,000 and $38,500. Seems reasonable, doesn't it? Under the Paycheck Fairness Act, WidgetCo would be guilty of gender discrimination.

One final example. Assume that Brad and Bridget both work for Alpha Inc., have the same job title, same level of responsibility, etc., and they are both earning $100,000 per year. Brad asks for a 5% raise, but Bridget doesn't ask for a raise. Brad gets the raise and ends up earning more than Bridget. Again, no problems here, right? Wrong - under the Paycheck Fairness Act, Alpha Inc. would be guilty of gender discrimination.

These are just three of many examples. The upshot is that the Paycheck Fairness Act would substantially alter the way American businessses are permitted to compensate their employees. Allan Dinkoff, an employment lawyer in the New York Office of Weil Gotshal & Manges summed it up in a Forbes article:

Under the existing law, employers are permitted to pay men and women different amounts, as long as that difference is because of a reason 'other than sex'. The Paycheck Fairness Act would eliminate the 'reason other than sex' defense and substitute "a requirement that the employer prove that its pay practices are divorced from any discrimination in its workplace or at the employee's prior workplace, that the pay practice is job related, and that it is consistent with business necessity."

Businesses will have to make adjustments for gender differences in negotiating skills - and willingness to engage in negotiation. They'll also have to "right previous wrongs" of their employees' previous employers. That doesn't seem very "common sense" to me...

Christina Hoff Sommers also questions the "common sense" of the bill:

But the bill isn't as commonsensical as it might seem. It overlooks mountains of research showing that discrimination plays little role in pay disparities between men and women, and it threatens to impose onerous requirements on employers to correct gaps over which they have little control."

Gender pay equity is an important issue, and I think that we, as a society, should do everything we can to eliminate gender discrimination in compensation. But the Paycheck Fairness Act is not the way to achieve gender pay equity. We need a "common sense" solution, and the Paycheck Fairness Act has too many nonsensical implications.

 Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. For more than a decade, she's been working with businesses and governemnt agencies providing expert EEO analysis. Stephanie has published several articles on examining compensation systems with respect to equity. She is the host of The Proactive Employer, and is the Director of the Equal Employmet Advisory and Litigation Support Division of MCG.

Comments

[RaeH]

Thank God. Finally, someone writing about the Paycheck Fairness Act that has some common sense! I have been doing payroll for over 25 years and I know there are a ton of variables that come in to play when hiring someone. It is impossible to compare apples to apples when every individual brings different backgrounds to the employer.

It's just like fingerprints, everyone is different with different backgrounds, different skills, different negoiating skills. The only thing this bill will accomplish is that men would be paid less in order to NOT upset the women workforce. It will do NOTHING to increase women's salary.

[Paul Weatherhead]

Thank you, Stephanie, for providing clear illustrations of what can become increased litigation costs for companies trying to employ US workers.

[Dan Walter]

As a wise person once told me, if is was common sense we wouldn't need to talk about it and there wouldn't be any disagreement.

Common Sense: People doing essentially the same job should make essentially the same amount of money (all other things being equal).

Uncommon Sense: All other things are very seldom equal.

Thanks for the great post. Hopefully it will keep people thinking (and maybe doing)

[Michael Haberman SPHR]

Under the Paycheck Fairness Act a woman would not have to be any good at negotiating a salary increase. She just has to be good at finding a male coworker who was and then encourage him to do the negotiation. She would then reap the same reward. Makes commonsense to me.

Great explanation of the bill with your scenarios.