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Do we need more government like this?

February 1, 2016

Somewhat lost in all the coverage of the Iowa debate and today’s caucuses was this little gem reported by the Washington Post, among others.

As America awaits the results of a political process that makes what your neighbor will think of you tomorrow more important than its eventual impact on the country and your vote is not necessarily secret, it is still business as usual in DC.

Using a rule change, the Obama White House now wants all private businesses employing more than 100 employees to add salary data to an existing report that tracks their employees by sex, age and job group.

The object is to see if women are being paid less than men for the same job. If discrepancies are found, the EEOC has the authority to levy fines and list the companies in the public record.

On the face of it, the idea may sound good. It isn’t exactly a secret that women are often paid less than men. It even happens in the White House. It isn’t a new rule either. The legal basis cited  is the Equal Pay Act of 1963. The act recognizes certain exclusions (Section 206d-1) but when discussed at the political level those exclusions are not often cited.

What is somewhat stinky about this is that it is based on a 2014 executive order that requires all Federal contractors to provide salary data for each group of employees and abolishes all so-called “gag rules” that formerly prohibited revealing salaries publicly.

A lot of hot air is expended to demonize greedy capitalists who victimize their employees in general and women in particular. This rule affects small businesses disproportionately, since large companies already have staff that do nothing but interpret rules and prepare compliance reports.

Perhaps you are thinking that having 100 employees takes you out of the “small” business realm.

While the government’s 46-page definition of a “small” business is popularly thought of as one having fewer than 500 employees, the threshold for compliance to this rule is set at 100 employees, and does not appear to be subject to the revenue limits given consideration in that document.

This rule change extends the requirement to private businesses, taking it out of the fair pay realm and into the role of how much control a government should have over private enterprises.

Considered that way,  this rule change would seem to be an overreach if it is based upon an extension of an executive  order.

In an election year that features the war on women as a theme for Democrats, this would seem to be a way to entice women to vote for Democrats so that the underlying executive order doesn’t get flushed in 2017.

If this is a good thing to do, one has to wonder why the President didn’t have the Senate change or amend the underlying legislation.

The report itself has been criticized for having overly broad job groups. The report requires the use of  job categories summarized in the 2010 EEO-1 Job Classification Guide. For a look at how that works in actual practice let’s look at one of the categories.

One such category looks like this. “Writers and Authors  SOC Code 27-2043 Census Code 2850”  The description is as follows:

“Originate and prepare written material, such as scripts, stories, advertisements, and other material. Excludes “Public Relations Specialists” (27-3031) and “Technical Writers” (27-3042).”

By that definition,  a studio employee who wrote the final script for the new Star Wars movie would have to be paid the same as the person who wrote the advertisement for the movie, or who blogged about it on the company website. Obviously there is a bit of a discrepancy in the skill level required.

In short it does not differentiate between a new literature graduate with zero years experience and an employee with a degree in marketing and five years experience.

No one is proposing that it is OK to pay you less if you are a woman, if you do exactly the same job, utilizing exactly the same skill set and perform at exactly the same level of expertise for the same length of employment.

In practice, it’s rarely that simple. Defending any legitimate pay rate discrepancies that occur is so time consuming and expensive that most small employers cannot afford to defend every case. Proving that your business is exempt under the exclusions of 206d requires time, energy and often a high-priced attorney to interpret the rule.

The result is that they just give in and pay everyone the same, meaning that the best employees make less and the newest and least skilled employees are paid too much in proportion to their value.

If this were codified into a law, it would be possible to build in either more detailed job descriptions or make appealing a fine less onerous.

Of course if they did that, the government might have collected far less than the $85 million dollars in penalties it has collected since 2010, not to mention that it might cost a few dollars less to produce a product or service.

That’s the problem with the “Big Government has all the answers” argument. One-size-fits-all solutions rarely  increase efficiency or provide justice. They do make it a  lot easier for governments to collect money.

Much is said about the growth of the so-called “gig economy” which does away with employee positions altogether for many industries. Also  frequent targets are businesses that move their companies offshore.  The solution to that scenario is to give companies a “tax break” to repatriate back to the U.S.

One might argue that a “rule break” would do more to entice businesses back than a one-time get-out-of-jail-free card.

From → op-ed

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