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Business Costs & Regulation

Remedying the Gender Pay Gap

A proposed federal rule designed to bring men's and women's pay in line would be an ineffective, burdensome mandate for employers.

Q. What do you think about a proposed federal rule to require all companies with more than 100 employees to report the pay, age and sex of their workers, grouped by occupation? It’s supposed to expose pay discrimination against women.

A. It is not only illegal but unethical for an employer to pay an employee in a particular group—age cohort, race or sex—less than a colleague in the same job because of that characteristic. That’s indefensible discrimination. Fortunately, it is becoming rare today. Where such bias exists, the employer should be held responsible by legal action. But employers have a right to pay varying wages to workers in the same or similar jobs if the differential is due to verifiable factors, such as education and experience, and/or intangibles, such as quality of work, creativity or work ethic.

This proposed rule strikes me as a burdensome new mandate designed to close a gender earnings gap that is mostly the result of factors other than discrimination. The gap is largely a legacy of historical social trends that are fading on their own—such as lower levels of education among women and their former tendency to leave the workforce for long stretches to raise children.

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Today, with more young women graduating from college than men, and with more of them choosing higher-paying careers once dominated by men (in technology, medicine, finance and so on), the earnings gap between young men and women of similar education is rapidly narrowing. In 2012, all millennial women (ages 25 to 34), whatever their education and occupations, earned 93% of what their male counterparts earned; the comparable figure was 84% for women of all ages. Among millennial college graduates in professional positions, the gender gap has probably narrowed to zero.

One big problem with the proposed federal reporting rule, according to David Cohen, a pay consultant cited in the Washington Post, is that employers would have to slot each of their employees into one of 10 broad categories of work. A group called “professionals,” for instance, could include jobs as different as physicians, nuclear engineers and social workers. That will tell us nothing.

Have a money-and-ethics question you’d like answered in this column? Write to editor in chief Knight Kiplinger at ethics@kiplinger.com.

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