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Business, Free Enterprise and Constitutional Issues; Pro-Life and Pro Second Amendment. Susan Lynn is a member of the Tennessee General Assembly. She serves as Chairman of the Consumer and Human Resources subcommittee and on the Finance Ways and Means Committee. She holds a BS in economics and a minor in history.

Tuesday, April 25, 2006

Pay Equity a Trial Lawyers Dream…

March 2006

Lawmakers creating new ways for trial lawyers to file lawsuits is not really something I hear the public demanding. Yet, a comparable worth bill disguised as “pay equity” purports to put teeth in the law. Trial lawyers are crossing their fingers and the citizens should be concerned, because “teeth” is code for punitive damages against employers; a trial lawyers bread and butter.

As American’s, we support equal pay for equal work because that is a moral concept. Men and women who work for the same firm, perform the same job and hold the same credentials deserve to start at the same pay.

Yet, that fair concept does not go far enough for some liberals as they seek to end what they see as continued discrimination against women. They assert that the average woman with a full-time job earns only 76 percent of a male's earnings, and that women’s lower participation in the labor market is reflective of discrimination. Their answer is “pay equity” or “comparable worth” legislation.

What they are asking for is not the same pay for equal work but to replace the free market system of setting wages with a government wage-setting mechanism that would define "fair wages” for jobs. However, not for equal jobs but for jobs of supposedly comparable worth; even if those jobs are in completely different fields and for totally different employers.

Any appeal to consider logical economic factors that affect firms such as the marginal product of labor, business cycles, market differences, changing market conditions, tastes, technology, or other economic conditions in such a “pay equity” system are meaningless and untenable.

Logic would dictate that if pay equity discrimination assertions were true, and employers did have a labor source (women), that was 24% cheaper to hire than another labor source (men), then they would surely hire all that they could until the source was exhausted because the ultimate goal of employers is to reduce expenses and make a profit. Thus, males would face a higher rate of unemployment however this is not what we see at all in the labor market.

In actuality, the average wage gap between men and women is falling. However, that average is a raw figure that doesn’t tell the whole story. It must be adjusted by other factors that affect income such as: age, education, occupation, number of years in the workforce, and experience.

When adjusted for these factors, women are actually paid 98 cents for every dollar earned by a man. Is it possible sex discrimination is responsible for the remaining 2-cent adjusted wage gap? Sure. But it could also be accounted for by a mix of calculation errors, unconsidered differences between workers and several other economic factors.

Used in the UK, pay equity is a trial lawyers dream. Lawsuits are heard by a tribunal assisted by an independent expert who compares both jobs and rates each on a point scale. The average time to litigate a case is 17.5 months. Average cost of a fully appealed case can exceed $155,000 U.S. dollars. Typical descriptions of the system are that it is “arbitrary and subjective,” “remarkably time consuming,” and “neither fair nor efficient.” In fact, thirty years of “pay equity” lawsuits has not narrowed the (unadjusted) wage gap any.

Under pay equity, litigation seeking punitive damages threatens any firm that is not paying wages according to government determined “guidelines.” Equity is arbitrarily determined by comparing the job functions of comparable jobs. A losing firm is thus forced to raise the pay of its employee to that of another employee; perhaps even to that of an employee from another firm.

If it is decided that a firm knew the “equitable rate” the firm may be liable for additional damages. It is not a defense for the firm that the employee agreed to work for a given wage. Actions may be considered class action. Any job applicant may also sue. It is a misdemeanor to fire an employee who has revealed information regarding the pay of any other employee.

Why don’t people file such lawsuits now? Because without this legislation there is no basis for such a suit and no large payout. This bill has nothing to do with discrimination but everything to do with enriching lawyers and government determination of wages.

Never mind real achievement, just scout out a job you think seems comparable to yours and sue. This legislation doesn’t reflect the values of proud, hard working Tennesseans. Nor does it make any sort of economic sense. In fact, it would force many firms out of business, costing jobs for everyone.

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