May 3 2013

ATR: Straight Talk About the Wage Gap

ATR

IWF highlights some interesting facts regarding equal pay for women

When Equal Pay Day came upon us, the Independent Woman’s Forum released a bold video explaining many facts and statistics that you most likely did not hear in the media. Now with May Day celebrations abound, it’s a good time to once again look at one of the most popular arguments used by self-proclaimed “champions” of worker’s rights, equal pay for women.

The prevailing wisdom is that women earn 77 cents for every dollar that men earn. While that is technically true, IWF points out how that percentage is reached by calculating the average of all male workers and all female workers no matter what profession they are in. So instead of comparing teachers to teachers, or doctors to doctors, the “77 cents for every dollar” argument is based off of every worker in the overall workforce, in effect comparing jobs like plumbers and construction workers to other professions such as real estate agents and professors when in fact they are completely different jobs.

IWF also points out how more regulations from Washington that try to “close” this wage gap, while well intentioned, can actually have bad economic consequences and even make it harder for women to earn better pay. That seems to be a recurring theme with regulations, doesn’t it? Very well intentioned laws quickly become cumbersome and burden businesses even further.

If women’s groups around the country wanted to change something that actually made a difference for women, one would think they would focus on something that has real world implications, such as the marginal tax rate for second earners. For those who don’t know, a married couple’s income is taxed together. The unfairness behind this is that the first earner’s income (usually the husband’s) is taxed at a normal rate for a specific amount of income, and everything after that income is taxed at a higher rate. The second earner’s income, however (typically the wife’s) is completely taxed at that higher rate. So while the husband gets a generous tax relief, the wife is left with substantially less income than her husband. 

To make this easy to understand, here’s a hypothetical situation. Let’s assume there are two tax brackets, one at 10% and another at 25%, both husband and wife make $125,000 each, and any income after the first $100,000 is taxed at the 25% rate. For the husband, the first $100,000 of his income would be taxed at 10%, while the remaining $25,000 would be taxed at 25%, leaving him with $108,725. For the wife, however, her entire income would be taxed at the larger 25%, leaving her with only $93,750, a difference of almost $15,000! So even with the same exact pay, the wife is still left with less money in the bank than her husband.

There’s no denying women deserve equal pay in the workplace and play an extremely important role in our economy, not only with the work they contribute but also with the time they put in to look after their families. The solution for this, however, is not to try and force fair pay, which can only create burdensome red tape, but to look at solutions that will actually have real world effects for women around the nation. Fixing the idea of secondary incomes being taxed at much higher rates would immediately allow women to keep more of their own, hard-earned money. Demanding equal pay is a good first step, but if women want to be able to actually keep that money, they need to demand much more from their leaders in Washington, and from the groups that claim to represent them.

If you want to check out the video, as well as learn more about the IWF in general, click here.

Posted by Zach Montanaro on Friday, May 3, 2013 3:12 PM EDT


 

 

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