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Kamala Harris’s Misguided Plan to Close the Gender-Pay Gap

May 28, 2019 in Economics

By Ryan Bourne

Ryan Bourne

California senator Kamala Harris has unveiled a new plan to close the gender-pay gap.

Under Harris’s proposal, companies with 100 or more employees
would have to report pay differentials between men and women,
controlling for “differences in job titles, experience, and
performance.” If they could not show that men and women were paid
the same after factoring these controls in, they would be fined 1
percent of profits for every 1 percent gap in pay.

This “solution,” at one level, is curious. The statistic on
which widely reported claims of a “gender pay gap” are based – that
full-time female workers are paid only about 80
percent
of what full-time male workers make — doesn’t
account for job types, experience, or performance. In that sense,
Harris’s legislation recognizes that such metrics are meaningless
or, at least, too crude. But that means there’s also no reason to
think that beefing up “equal pay for equal work” legislation by
putting the presumption of compliance onto employers will close the
headline rate everyone discusses.

In short, Harris’s plan does not really target the “gender pay
gap” at all. It attempts to further stamp out gender pay
discrimination by “policing at the elbow.” That aim will have fewer
opponents. Yet the truth is, more factors than she accounts for
determine wages. Her legislation would create significant
compliance costs and avoidance strategies, lead to potential
surpluses and shortages of workers, and could even hurt women who
currently enjoy flexible working arrangements.

To see why, consider the Game of Thrones cast. Playing
each character really constitutes a different “job.” The company
producing the show could easily argue it has no pay gap at all
then, in a literal sense, even before collecting any information.
Yet suppose there were two extras running from Drogon in King’s
Landing in that penultimate episode – one male and one female -
with the same role, number of lines, screen time, and measurable
prior experience. There still might be good reasons why they could
command different pay rates.

The man, for example, may be of a certain height or look that is
in high supply among the pool of prospective extras. The woman
might perfectly reflect the needs of the show but have a lucrative
offer to appear in another show, requiring higher payment to
attract her. Quite simply, beyond “job titles, experience, and
performance,” supply and demand and other factors determine pay in
actual markets. Not accounting for them risks finding
discrimination where it doesn’t actually exist.

Indeed, it doesn’t make sense to think that work is of “equal
value” because you’ve controlled for observed performance factors.
It’s a …read more

Source: OP-EDS

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