Wednesday, October 8, 2014

Law Mandating "Equal Pay for Equal Work" is Logically, Economically, and Morally Wrong

In a June Town Hall Meeting, President Obama fielded this question concerning “equal pay for equal work”:

Hi, my name is Erin.  I just left a corporation in Minnesota, a Fortune 500 corporation, where I had my four-year degree, my male counterpart did not, and he was making $3 more an hour than I was.  My question for you is what are we going to do about it so as I grow up and other women grow up we are not experiencing the wage gap anymore?  

“Equal pay for equal work”: In the abstract, who would be against that?

The first problem is with the term “equal work”—it doesn’t exist. People doing the same job have widely varying degrees of productiveness. Some are more efficient. Some work faster, but make more mistakes that have to be corrected later. Some are slower and more deliberate, and thus make fewer mistakes. Ambition levels vary, as do leadership qualities and ability to adapt to changing conditions. Some are better “team players”. Experience varies greatly. Women on average may simply be less aggressive about going after raises. The list of variables is large. Equal work is a myth, just as equality in anything but the legal/political sense is a myth.

I spent my career in a New Jersey plumbers union. The pay scale is set by contract, and is equal for all members at all job levels; each year of apprenticeship (5), journeyman, foreman, general foreman, etc, has a set pay scale. Yet the quality of the worker varies greatly within each category. I’ve worked with individuals making the same pay scale but doing half the work as I, and others who are simply better. Having a degree of some sort—an apprenticeship graduation degree or four-year college degree—is no guarantee of productiveness.

Obama gave a long, rambling answer. As expected, he came out for government-mandated equal pay, making it easier for women to sue for back pay based on “discrimination,” banning companies from forbidding employees from sharing salary information, etc.—government mandate after government mandate.

Out will be judging people on individual merits; raises for better performance; unequal pay for unequal work, including for superior performing women. In will be paranoia; obsession over the next guy’s—or gal’s—pay level; or worse, the resentful slouch looking to hold back his productive betters. In will be the reign of mediocrity; out will be the reign of merit-based judgement. And in will be the all-pervasive fear of predatory lawsuits. Welcome to the drone company.

This is not to deny that some women are victims of unfair discrimination. There’s no doubt that this can be true. (Although Obama’s pay disparity claim—that women make only 77% of men—is a wild exaggeration. As the Left-leaning, normally pro-Obama New Jersey Star-Ledger noted in an editorial, the Obama-backed “Paycheck Fairness Act was a cynical ploy, because it relies on these bogus statistics. The disparity is more on the order of 91-95%, not far off of the statistical “margin of error.”)

But to the extent that pay injustice exists, that is no justification for dealing with the issue by force; i.e., by law. The issue of pay is strictly a contractual matter between employer and employee. The government should be protecting employer-employee rights to voluntarily contract, not dictating contractual terms based on statistics (which rank just above “damned lies” as a tool of deception), or anything else. Human beings are not drones. Any actual pay injustice that does exist in the workplace is a matter to be dealt with through education, rational persuasion, social activism, and economic competition, not governmental—i.e., armed—force. Free speech and reason, together, is a powerful force.

And Obama implied as much. He remarked that men should be equally concerned about gender pay inequities:

So this is something that I care a lot about not just because of my past, but also because of my future.  I’ve got two daughters.  The idea that they would not be paid the same or not have the same opportunities as somebody’s sons is infuriating.  And even if you’re not a dad, those of you who have partners, spouses -- men -- this is not a women’s issue.  Because if they’re not getting paid, that means they’re not bringing home as much money, which means your family budget is tighter.  (Applause.)  So this is a family issue and not a gender issue.

Yes, men should—and do—care about this issue. The president went on:

And there are some wonderful companies who are doing this.  And as I said before, it turns out that when companies adopt family-friendly policies their productivity goes up, they have lower turnover -- which makes sense.  Look, if you have a family emergency, and you go to your boss and you say, can I have a week off, I've got to take care of a sick child or a dad -- or can I leave early this afternoon because my kid is in a school play and I really think this is important, and they say, of course, nothing is more important than family -- how hard are you going to work for that person when you get back on the job?  You're going to feel invested in them.  You're going to say to yourself, man, these folks care about me, which means I care about you.  And if I have to take some extra time on a weekend, or I've got to do some work late at night when I'm not under an emergency situation, I'm going to do that.

So this makes good business sense.  But the problem is, is that we haven't done enough to encourage these new models.  And this is part of the reason why we did this Family Summit -- we wanted to lift this stuff up, show companies that are doing the right thing, encourage others to adopt the same practices, and maybe get some legislation that incentivizes better policies.

Family summits? Fine. “Lift this stuff up” (activism)? Wonderful. Freedom to persuade and agitate is powerful. And it gets results, over time. But legislation? Obama concluded: “In the meantime, though, if you're doing the same job you should make the same pay -- period; full stop. That should be a basic rule.  That shouldn’t be subject to confusion.”

What there shouldn’t be any confusion about is that government imposing “good business sense” by legislative force is immoral, impractical, and inimical to liberty and the proper purpose of government; which is to protect, rather than violate, individual rights. Obama conflates the benign and potent power of reason and freedom with the coercive and corrosive power of the gun. It is against someone who demands of politicians, “what are we [the government] going to do about it?” that we should scream, “FULL STOP.”

Related Reading:

How to Overcome Bigotry in a Free Society

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