“Pay equity” mandates are another weight dragging down the Ocean State.

Clearing out some old links reminded me that Rhode Island’s “pay equity” statute goes into effect this year, as Jack Kelly wrote in Forbes in late 2021.  While generally supportive of the legislation, Kelly did acknowledge the potential for “unintended consequences”:

According to Joshua Nadreau, a partner in the Boston office of the labor and employment law firm Fisher Phillips, Rhode Island’s statute is “one of the few pay equity laws that targets protected classifications other than sex or gender.”

Nadreau posits, “This may add considerable burdens to employers who may not have historically tracked this demographic information. How many employers track the religion or sexual orientation of their employees? One of the questions I have is whether an employer will be held legally responsible for a pay disparity between various protected classes if it doesn’t even possess the information to make that determination in the first place.”

More insidiously, “merit” is a tricky thing.  It’s not always easy to articulate why an employee is a “rock star,” and managers can easily disagree.  A key component of judgment for a manager is whether an employee is a personality match for that manager, and such subjective factors will now leave employers vulnerable to lawsuits.  Stack these requirements onto the side of the scale in favor of employers’ not expanding or staying in Rhode Island.  This sort of legislation makes employees more costly while doing nothing to make them more valuable.

Dragging down the economy isn’t the only reason to be wary of policies that seek to “correct” social outcomes.  I recently had cause to run a pay-related regression analysis that had sex as one of the variables.  The analysis did find that women make less when starting a new job, all else equal, although the “all else” was missing some very important variables (like industry).  However, that’s the subject of a continual back-and-forth.  The overlooked consideration that piqued my interest was that the gap is much less significant for younger women than for older ones.

Add in the fact that younger women are more likely still to be pursuing education while their male peers are more likely to start working full time sooner (often in jobs with lower ceilings), and it’s entirely possible that young women actually have an edge.  In 20-40 years, we could see a complete reversal and worsening of the pay gap.

I’d need to do more research before insisting that’s the case, but the point is that it’s not even a matter of discussion.  The unintended consequences, in other words, could be massive, devastating, and long-standing when a moral panic produces reckless social experimentation by a cultural elite with little ability or appetite to think a contentious topic through completely.


Featured image by Lucas Sankey on Unsplash.

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