Equal Pay Hurts Working Women

On Friday afternoon, I attended a luncheon in Chicago that featured an address by embattled Wisconsin Governor Scott Walker. During the question period, a woman at my table asked the governor about the popular belief that Republicans have launched a "War on Women." Of course, the governor rejected this characterization, and mentioned his recent repeal of "Equal Pay" legislation as an example of something he has done to actually make job and earning prospects better for women.

What's that, you say. How can repealing a rule intended to ensure earnings parity between men and women actually help women?

It's simple: "Equal Pay" legislation makes it easier for employers to discriminate against women. Perversely, these rules relieve sexist employers of the higher costs they would face were they to hire a man instead of a women for a particular job. 

By repealing "Equal Pay" legislation, Walker has made it more expensive for sexist employers to hire men over women and has removed a piece of bad public policy that achieves the exact opposite of its intent.

Under "Equal Pay" legislation such as the federal Lilly Ledbetter Fair Pay Act of 2009, female employees may sue their employers at practically any time if they alledge that their male colleagues are earning more than they for identical or nearly identical work. President Obama's signature on this bill — the first of his presidency — was seen as a victory for women in the workplace.

However, like the minimum wage, "Equal Pay" legisation freezes many women out of the workforce by making it harder for them to compete with male counterparts.

So why would a woman offer willingly to work for 20% less than an equally qualified man? Perhaps she really wants the job. Perhaps she wants to get in the door so she can have the opportunity to rise through the ranks. Perhaps she knows there's a possibility she will get pregnant or she has some catching-up to do after being out of the working world while raising children.

There are many reasons why a woman might choose to price her time competitively. But, "Equal Pay" legislation prevents her from doing so.

Let's consider a scenario where two job candidates are being considered for one position. One is a man and the other is a woman, and they are equally qualified. With "Equal Pay" rules, a boss who would prefer to hire a man finds it easy to do so – there is no cost difference between the two candidates. 

But without such rules, the woman may agree to work for less than the man. Either the employer will make his decision based on maximizing value for cost and hire the woman, or he will bear a higher cost by indulging his sexism.

What situation is better for women? If there is a "War on Women," on which side of "Equal Pay" should concerned women and their male allies stand?