The Pay-Equity Police Get New Ammunition

Be prepared to report on employees by 14 gender, race or ethnicity groups, within 12 pay bands.

Feminists have something new to celebrate on April 12 this year. That’s the date they have dubbed “Equal Pay Day,” when they claim that women’s earnings have finally caught up to men’s earnings from the year before. Each April activists hold demonstrations and call on Congress to pass the misguided Paycheck Fairness Act.

The legislation would, among other things, require the Equal Employment Opportunity Commission to collect wage data from firms “by the sex, race, and national origin of employees.” First proposed in 1997, the bill has no chance of passage. So now President Obama is doing an end run around Congress to give the feminists what they want.

The EEOC is manipulating the obscure Paperwork Reduction Act for its exact opposite purpose. Right now employers are annually required to complete a form, called an EEO-1, with 140 data points. The commission’s plan is to change the form, beginning next year, to encompass 3,360 data points. Public comments on the new form were due April 1, and the EEOC is expected to issue its final decision this summer, pending approval from the Office of Management and Budget.

This would put an enormous compliance burden on businesses. Companies with 100 or more workers would be required to report on employees by 14 different gender/race/ethnicity groups, within 12 pay bands and 10 occupational categories. The companies will also have to report the number of hours worked per employee—even for salaried staff, whose hours now are not normally tracked. Firms with multiple locations will have to complete such forms for each branch with more than 50 employees, meaning an establishment with 10 offices could find itself juggling 33,600 data points.

Companies with between 50 and 99 workers would retain the current form, and those with fewer than 50 would be exempt. This gives small firms yet another reason—along with ObamaCare and the Family and Medical Leave Act—not to grow.

The EEOC’s proposed measure of wages, W-2 earnings, includes overtime pay, tuition reimbursements and benefits. But because those extras boost some workers’ incomes more than others, they muddy the data for anyone trying to tease out the effect of any alleged discrimination. The National Research Council, in a 2012 report on compensation, recommended using base-pay rates calculated from the Labor Department’s Occupational Employment Survey. But the EEOC disregarded this recommendation because it considered the W-2 figure to be a more complete record of compensation.

The occupational categories are too wide to suggest, to say nothing of prove, discrimination. One category, “professionals,” includes artists, computer programmers, designers, dietitians, editors, engineers, lawyers, librarians, scientists, nurses, physicians, surgeons and teachers. Companies can await an avalanche of lawsuits and investigations if their female “professionals” are paid less than their male “professionals”—even if the former are dietitians and the latter are computer programmers.

That’s the real story. In the EEOC’s hearings on March 16, proponents of the updated form emphasized how it will help investigators find new targets. Emily Martin of the National Women’s Law Center called the new form “a critical tool for focusing investigatory resources to identify pay discrimination within equivalent jobs.”

The commission could use data from the form to justify “random” checks on firms and accuse them of underpaying, just as the Internal Revenue Service does “random” audits. Or the EEOC and the Labor Department could try to regulate wages for occupations in which women predominate—say, if the government decides that secretaries or nurses are underpaid.

The EEOC says that completing the form would take each company only eight hours the first year and 6.6 hours thereafter. On that basis, the commission estimates that the annual burden nationally would be $10 million. These estimates are preposterously low. The EEOC assumes that 60,886 firms will file, when the number of firms with 100 or more workers was 101,642 in 2012. These firms had 1.6 million locations, many of which would have to complete their own forms. The U.S. Chamber of Commerce calculates more realistically that the cost of compliance would be at least $693 million annually.

Another problem: Firms’ pay data could reach competitors. The EEOC proposal doesn’t address how it will secure the information, and government data on federal contractors, such as Boeing, is available through a Freedom of Information Act request. A rival—say,Lockheed Martin—will be able to ask to see Boeing’s extended EEO-1 information. Boeing could claim that its wage data constitutes a trade secret, but at best it will have to pay attorneys to walk through a lengthy appeals process.

When the Obama administration decides to collect countless thousands of new data points, it has a purpose in mind. Not much imagination is required to see that the plan here is to give Washington new powers to police the workforce. Let’s hope the Office of Management and Budget will refuse to approve the new form. Do you want the leaders of “Equal Pay Day” demonstrations to be running your business next year?

This piece originally appeared in The Wall Street Journal

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Diana Furchtgott-Roth is a senior fellow and director of Economics21 at the Manhattan Institute. Follow him on Twitter here.

This piece originally appeared in The Wall Street Journal