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President Clinton Proposes Government "Solution" for "Gender Pay Gap"

James C. Sharf
Sharf and Associates

In his January 30 Saturday radio address, President Clinton targeted what has been termed the "gender pay gap"—the percentage difference between female and male median annual earnings which in 1997 stood at 74% (up from 60% in 1979). His remarks followed Senator Tom Daschle's introduction of S.74, the Paycheck Fairness Act, on January 19th. In his State of the Union Address, Clinton dedicated $14m in the FY 2000 budget for this "Equal Pay Initiative" to get the federal government into "gender pay gap" enforcement. Clinton's rationale for the Initiative was that "Too many employers still under-value and under-pay work done by women."

In Section 2 of the Act, Congress finds that "women earn significantly lower pay than men for work on jobs that require equal skill, effort, and responsibility and that are performed under similar working conditions…. Which may deprive workers of equal protection on the basis of sex in violation of the 5th and 14th Amendments" …in apparent violation of the Fair Labor Standards Act of 1938, the Equal Pay Act of 1964, and the Civil Rights Act of 1964. The Act authorizes class actions to be brought with plaintiffs to receive not just "make whole" back-pay awards, but punitive and compensatory damages as well.

Section 5 of the Act authorizes the Secretary of Labor to "promulgate such rules and regulations necessary to carry out"… "guidelines to enable employers to evaluate job categories based on objective criteria such as educational requirements, skill requirements, independence, working conditions, and responsibility, including decision-making responsibility and de facto supervisory responsibility." "The guidelines... shall be designed to enable employers voluntarily to compare wages paid for different jobs to determine if the pay scales involved adequately and fairly reflect the educational requirements, skill requirements, independence, working conditions, and responsibility for each such job with the goal of eliminating unfair pay disparities between occupations traditionally dominated by men or women" (emphasis added).

As the Washington based Employment Policy Foundation notes (1 Feb. 99):

The measured gender pay gap does not account for relevant economic factors influencing earnings such as experience and tenure, years and type of education, hours of work, and industry and occupation_factors which can differ significantly between men and women. For example, the 74% estimate compares `full-time' men and women (those working over 35 hours a week), but full-time women actually work fewer hours on average than full-time men. Simply correcting for hours differences increases the female/male pay ratio to 81%.

Numerous studies show that when other relevant economic factors are accounted for, the measured gender pay gap shrinks considerably_by some estimates to zero. Remaining differences between the wages of men and women could be attributable to statistical mismeasurement, unaccounted characteristics, discrimination, or some combination of these. But it is clearly wrong to attribute the measured gender pay gap solely, or even primarily, to workplace discrimination.

As pointed out by a fellow of the American Enterprise Institute in a Wall Street Journal editorial (4 Feb. 99, A-22):

It's payoff time for the feminists who have supported President Clinton… Never mind that it is already illegal to pay unequal wages to equally qualified men and women who do the same job. When that occurs, women sue and invariably win. But such discrimination is rare. The only way to get rid of the average wage gap is to mandate equal pay for different jobs, a practice known as `comparable worth.' Since comparable worth has been rejected in courts all over the country, Mr. Clinton now proposes to enforce it through the bureaucracy.

Under the President's plan, government bureaucrats will `objectively' determine a job's worth by considering the working conditions and the knowledge or skill required to perform a task. Neither experience nor risk, two factors that increase men's average wages relative to those of women, are included as relevant job-related criteria. Thus these criteria favor traditionally female occupations over male ones (secretaries over truck drivers), and white-collar jobs requiring education over blue-collar work…

These guidelines are described as `voluntary,' but there is nothing to prevent Mr. Clinton from issuing an executive order forbidding the federal government from doing business with companies that do not adopt the standards.

While the stated intention of these proposals is equality, they rest on an assumption that women cannot make it on their own. Women are allegedly funneled into certain occupations by a sexist society_a view that flies in the fact of feminist arguments that women can do any job. Comparable worth works against women's interests. If employers had to pay women higher-than-market wages, fewer women would get hired in the first place.

Unemployment for both men and women is near a 30-year low; wages and labor force participation rates for women are at an all-time high; and the economy is expanding robustly. The best way to help women succeed economically is to keep the economy strong_something Washington won't accomplish by giving bureaucrats more power over the market.

Just how rare "comparable worth" arguments are is revealed by the EEOC's own report to Congress which revealed that in FY '97, only 1.4% of the total of all charges brought to the Commission were brought under the Equal Pay Act. As former OFCCP Director under the Ford Administration, Larry Lorber in the Washington office of Sonnenschein, Nath and Rosenthal notes (personal communication):

In our increasingly sophisticated and dynamic economy, a static, litigation-driven model which artificially measures or restructures compensation makes no sense. The extensive litigation under both the Equal Pay Act and Title VII makes it exceedingly clear that the courts do not want to be dragged into the wage setting business. The proposed Paycheck Fairness Act is a thinly veiled effort to revive the "comparable worth" theory which was first raised in the 1980's. The Act will fundamentally change the enforcement scheme of our discrimination laws. First, it will establish an unlimited punitive damages regime which will place employers in the position of facing massive class action litigation if there is any statistical difference on the basis of gender in average pay rates. This flies in the fact of the 1991 Civil Rights Act where the Congress carefully fashioned a capped level of damages based upon workforce size. The Act will also require the Labor Department to create a `voluntary' model to measure differences in pay levels between different occupations. The law books and cases are full of examples of such `voluntary' guidelines being adopted to decide cases. Indeed, in light of the lessened standard for expert testimony, such guidelines could welcome the basis for a new spate of `creative' pay equity litigation. Finally and most importantly, the Paycheck Fairness Act and the new emphasis on `pay equity' simply ignores the main issue involving gender integration of the workforce. Our laws are clear that prohibition to access to jobs on the basis of gender is against the law. Full and vigorous enforcement of Title VII as well as the Equal Pay Act will address that problem. The Pay Equity movement and the Paycheck Fairness Act avoid the real problem by simply creating a litigation, damages, and government guideline regime which will serve to homogenize the workplace and restructure our compensation setting methodologies.


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