September 30, 2010
by Diana Furchtgott-Roth
Just before the Senate adjourned late Wednesday night, Majority Leader Harry Reid, D-Nev., took procedural steps that could lead to a vote on the Paycheck Fairness Act, a bill that would vastly expand the role of government in employers' compensation decisions.
Reid's action is an insult to women. Does he really believe that women are underpaid? If so, why wait until the evening the Senate adjourns after a two-year session to file cloture? If not, this is just a sop to his Nevada union base.
By filing cloture on the motion to proceed, the bill is now scheduled for debate in the lame duck session on Nov. 17. If it meets the 60-vote requirement, it will proceed to a vote on the floor. It has already passed the House of Representatives, and, if it passes the Senate, President Obama has said that he will sign it.
Since the Democratic caucus has only 59 seats, Reid will need the help of some Republicans to prevail. Senate elections in West Virginia, Delaware and Illinois are special elections to fill unexpected vacancies, so the winners will be seated right after the election and will vote in the lame-duck session in November.
Reid's action follows the unveiling of a General Accountability Office study on Tuesday at a Joint Economic Committee hearing at which I was a witness. The study concluded that women comprised 40 percent of managers in 2007 and that female managers earned 81 cents on a man's dollar.
Sounds like discrimination, right?
But the study was accompanied by a letter from Andrew Sherrill, GAO director of education, workforce, and income security Issues, explaining that the GAO study didn't account for "managerial responsibility, field of study, years of experience, or discriminatory practices, all of which can be found in the research literature as affecting earnings."
Everyone knows that managers with different levels of responsibility and experience are paid differently. Since these major variables were omitted, Sherrill stated, "Our analysis neither confirms nor refutes the presence of discriminatory practices."
But that doesn't stop feminists from asserting that women are underpaid, 77 cents on a man's dollar, and calling for the Paycheck Fairness Act to raise female wages -- even though women now have an employment advantage, with unemployment rates almost two percentage points lower than men.
Just as in the GAO managers' study, the 77-cent figure compares all full-time women's wages with all full-time men's wages, and doesn't account for differences in jobs, education and time in the work force. When all these factors are accounted for, the wage ratio is closer to 95 percent.
The Paycheck Fairness Act requires the government to collect data from employers on the sex, race, and national origin of employees, adding to red tape, paperwork, and hiring costs.
It would only allow employers to defend differences in pay between men and women on the grounds of education, training, and experience if these factors are justified on the grounds of "business necessity." So male bank managers with college degrees couldn't be paid more than female cashiers if the college degree for the manager wasn't consistent with "business necessity."
The bill's opt-out clause would facilitate class-action suits. Now, workers have to agree to take part in class-action suits to be included; under the bill they are automatically included unless they opt out.
The bill would increase penalties that courts could levy on employers. Now, if employers are found guilty of discrimination, they owe workers back pay. This would increase to back pay plus punitive damages.
If enacted, the Paycheck Fairness Act would raise unemployment even higher than 9.6 percent by trapping firms in litigation and encouraging them to reduce hiring and move operations abroad. This bill would not discriminate, reducing the paychecks of both men and women.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, was a Senior Fellow at Hudson Institute from 2005 to 2011.
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