The unintended consequences of policies aimed at eliminating the pay gap: Beginning in 2018, businesses with more than 100 workers would have had to collect and report data on employment by race and gender to the Department of Labor. However, this week the Trump administration put a halt to that initiative. As Romina Boccia writes, the data collection effort, while intended to address the so-called pay gap between men and women, would have induced companies to adopt pay policies more likely to hurt women:
“Women have shown a strong preference for in-kind benefits over cash wages in polls, for example, which is not included in studies that explore the reasons for the gender wage gap.
“According to a Department of Labor study, differences in education, experience, choice of industry and occupation, career interruptions, and hours worked explain all but 5 cents of the so-called wage gap. Immeasurable components of compensation—such as flexible work schedules—likely account for the remaining gap. […]
“Employers who are weary of costly discrimination lawsuits against them react most effectively to such a rule by adopting more rigid pay structures.
“To the detriment of workers, the best way to protect against unfounded discrimination claims based on incomplete data is to have one-size-fits-all pay structures that fit neatly into the boxes on government reporting forms.
“The problem is that this reduces the availability of flexible work arrangements, which are especially important to working parents. It also leads to less performance-based pay, like bonuses, which encourage and reward excellence.
“Boxes on government forms simply can’t capture sufficient data to explain differences in wages and promotions based on employee behavior and preferences. The result is less flexibility and more rigidity in the workplace.
“Differentiated pay is a crucial mechanism for attracting and retaining qualified employees. Rigid pay structures distort the labor market, reducing economic growth and job and wage prospects for many workers.” [The Daily Signal]
