I saw this clip of Kamala Harris at a rally talking about the gender pay gap.
In America today, women are paid 80 cents on the dollar. It is an outrage and has to change. Tomorrow, I will announce a plan to close the pay gap and hold corporations accountable. There will be penalties if they don’t. pic.twitter.com/TI5MDCRsNL
— Kamala Harris (@KamalaHarris) May 20, 2019
This post is not about debunking the gender pay gap, there are other people who are happy to write theses about that.
I am here to discuss the effect of the law of unintended consequences and Kamala Harris’ proposal.
This is what she wants to do:
Women shouldn't bear the burden to prove they're not being paid fairly. It's time for large corporations to step up and prove they're paying people equally for equal work. pic.twitter.com/ua2Lx2dvFC
— Kamala Harris (@KamalaHarris) May 20, 2019
Politico attempts to explain this:
Companies would face a 1 percent profit fine for every 1 percent wage gap that they allow to exist in their ranks. The fines would total $180 billion in the first decade, according to the campaign‘s projections, with smaller takes in later years as companies come into compliance. The money would support paid family and medical leave under the FAMILY Act, a bill widely embraced by Democrats and sponsored by one of Harris’ rivals, Sen. Kirsten Gillibrand (D-N.Y.).
To avoid paying fines, businesses with 100 or more employees would have to achieve a new type of “equal pay certification“ every two years under a new federal program headed by the Equal Employment Opportunity Commission. The Harris campaign, in its announcement, said her plan would require employers to prove they’re not engaging in discrimination. The current system, by contrast, puts the burden on employees to prove individual cases of discrimination — a process that can take years and run up monstrous legal fees.
Harris’ plan would also require companies to report the percentage of women in leadership positions and the percentage of women who are their top earners. In addition, it would require federal contractors to prove equal pay certification in order to bid for contracts over $500,000.
So under President Harris, companies will have to perform internal audits and report their payroll, hiring, firing, promotions, and corporate structure to the Federal Government every other year for review.
Let us jump over to Forbes for a second.
The NFIB Research Center found in its 2016 Small Business Problems and Priorities survey that small-business owners view unreasonable government regulations as a top priority, second only to the cost of health insurance. One in three respondents find the problem a “critical issue.” On top of this are state and local government regulations. And the regulatory changes imposed often generate a stream of additional costs into the future and distort business investment decisions.
For small businesses, these regulatory costs are numerous and very different depending on the nature of the business and the regulator. In a 2017 NFIB survey, small-business owners said that the greatest problem created by regulation is cost of compliance. Almost 70 percent of small-business owners said they check out compliance requirements themselves, which takes time away from producing goods and services for their businesses. In 2009, the Small Business Administration put compliance costs at over $10,000 per employee. It has only grown since then. The regulators do not coordinate their activities nor do they undertake “cost benefit” analyses to see if the benefits of the regulation are justified by the cost. As a result, more than half of small-business owners do not believe the benefits of the regulations they face justify the cost of compliance.
The cost of regulatory compliance is often the second most expensive cost a business has after healthcare. It has no value add, other than the government not stomping your business out of existence.
Under the Harris proposal, companies will have to add more employees for the sole purpose of pay gay regulatory compliance. Performing the audits and managing the personnel records necessary to show the government that the company is paying fairly.
This is not a value add job, this is a make-work job forced onto companies by the government.
With smaller companies and contractors, this will be additional work carried out by owners or managers that detracts from the “real” work of maintaining the business.
This just adds cost.
I have spent my professional life in industry and tech.
We know that in general more men than women are in engineering and tech. Some areas like biotech and genetics are more evenly split.
In most of the manufacturing and engineering companies I have been in, the majority of the engineering and manufacturing labor force has been male. There may have been women in those areas, but the majority of the female employees were in marketing, sales, HR, purchasing/supply chain management, administrative assistance, etc.
The Cut describes Kamala Harris’ plan this way:
On Monday, one day after Harris stressed to CNN that the wage gap is a “really big issue,” the presidential candidate officially unveiled her plan to abolish it. Per the New York Times, Harris’s plan — what her campaign has called “the most aggressive equal pay proposal in history” — dictates that all companies with 100 or more employees must show they have “eliminated pay disparities between women and men who are doing work of equal value.” Corporations will also be required to report the percentage of women in high-paying leadership roles. (Per the Census Bureau, women currently make 80 cents for every dollar that mean earn — a disparity that widens for women of color.)
How does the Federal Government decide what constitutes equal value?
How much flexibility does the government give in terms of salary adjustment for qualifications, whether it is an MS or PE, or other training in the use of specific and esoteric equipment or software?
What is the value of a process engineer versus an R&D engineer, both at the same corporate title of Associate Engineer?
The Law of Unintended Consequences almost says that there are always unanticipated reactions to any directed action. Almost always, those unanticipated reactions are negative, and usually, they are more disastrous than the original problem trying to be solved.
What Kamala Harris’ plan will do is make hiring women at the low end of the pay scale, entry-level experience, working mothers, and other women who prioritize life in the work/life balance a liability. These are all women who would accept lower rates of pay in exchange for non-financial compensation – i.e, more time off or job opportunities – if by doing so she is driving down the average salary for women at the company?
Now a woman might negotiate with a company to work 30 hours a week so she can be home when her kid gets home from school if. With the Harris plan, that woman on paper widens the company’s gender gap, even if that woman is happy with her compensation.
That is bad, but in a business whereby the nature of the business, the majority of the higher paying jobs are held by men, the gender gap pay scale is exacerbated.
There are fewer female engineers at Boeing than male engineers. A fresh-out-of-school female engineer would have no chance of getting hired at an entry-level pay grade just to make Boeing look bad because she is being paid less for “work of equal value” than a male engineer with a few years experience.
Some companies might just do to very rigid pay scales that do not account for variations in qualifications, years experience, and value add. That will level the field but will make those businesses highly uncompetitive on compensation.
Harris might be trying to force companies to bump women’s salaries across the board, but that is not that simple.
Consider what Google found when it did its own audit. It was trying to be so woke and fight the gender pay gay so hard, that it actually underpaid its men and opened the door to a sex discrimination lawsuit by the men in the company.
If women are being fairly compensated and companies over correct to comply with Federal regulators, companies will find is men asking – and perhaps even suing over – “why did I not get a $10K boost in salary?” Or “why am I paid less than my female counterpart?”
With small businesses and contractors, the problem will be even worse.
This whole thing will be a giant, expensive mess of bureaucratic regulations that under the guise of helping women will make many women into unfavorable hires. It will also hurt the ability of companies to be competitive in hiring and flexible in time off, scheduling, and performance-based rewards.
If there is an actual concern that female employees were being discriminated against by-and-large, there are things that can be done. Perhaps making the DOJ more responsive to female whistleblowers.
But jamming a whole new set of regulations onto companies that force them to report their gender pay to the Federal Government for review is perhaps the worse possible idea unless her intention is to destroy the economy.