More government intrusion into private sector pay

Yesterday my colleague Jay Tea mentioned the suggestion by Federal “pay czar” Kenneth Feinberg that the government should give bank management the power to reduce or postpone executive bonuses when their banks are struggling financially.

The White House is currently supporting an even bigger intrusion into business payrolls — the so-called “Paycheck Fairness Act.”

In an orchestrated effort that included a statement by President Barack Obama and an event at the White House featuring Vice President Joe Biden, Attorney General Eric Holder and Labor Secretary Hilda Solis, the president and his cabinet endorsed the Paycheck Fairness Act.

The House approved the act in 2009, but the Senate did not approve it. In the 111th Congress, both the House and the Senate have offered legislation that covers a wide range of workplace requirements and regulations, including training girls and women to become better at negotiating pay and benefits, and the establishment of a data base of U.S. workers’ pay in both the public and private sector.

At the White House on Tuesday, Biden was the keynote speaker at a Middle Class Task Force event where he told invited guests that the Obama administration is “on the right side of history” by passing legislation to ensure women are paid the same as their male counterparts.

The Equal Pay Act of 1963 outlawed base pay discrimination between men and women hired to perform the same work, but it gave businesses some leeway in adjusting pay rates based on seniority, merit, performance-based incentive systems, or other adjustments applied equally to men and women.

It is standard practice for businesses to consider any number of factors when determining employee pay — age, marital status, education, professional accomplishments, experience, previous compensation level, on-the-job performance, etc. Most professional employees are also given the opportunity to negotiate the base salary offered to them by their employer.

Regardless of how “fair” it may sound, when the government tries to tamper with private sector salaries, the result can only be lower wages across the board, because businesses will choose to settle for “lowest common denominator” pay rates, rather than run the risk government lawsuits and fines because of pay differentials between men and women, or between employees of different races.

The Paycheck Fairness Act would also give the government the power to to compile a massive database of private sector salaries and benefits. Armed with this data, the Department of Labor would suddenly be in a position to begin mandating “fair” compensation rates for certain kinds of work, and then threatening businesses that deviate from those rates.

None of this type of government interference will lead to more jobs or better pay. Even if a handful of employees see some immediate benefits, the result across the business market will be negative.

“Unexpectedly”, of course.

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