Quote of the Day:

When it comes to economically foolish laws, California is second to none. A good example is the California Fair Pay Act, which Gov. Jerry Brown is expected to sign in coming days.

Susan Ketterer in the Wall Street Journal

The California Fair Pay Act, which was passed unanimously (!) by the California state senate in August, bears watching because it is very similar to the Paycheck Fairness Act voted down by the U.S. Congress in 2014.

The act makes it illegal to pay men and women differently for "substantially similar work." What could be wrong with that? Well, the problem is that such differences are overwhelmingly not at all the result of sexual discrimination. There are other factors.

As Sarah Ketterer, cofounder and CEO of Causeway Capital Management, observed last week in the Wall Street Journal:

Start with hours worked. Full-time employment is technically defined as more than 35 hours. This raises an obvious problem: A simple side-by-side comparison of all men and all women includes people who work 35 hours a week, and others who work 45. Men are significantly more likely than women to work longer hours, according to the BLS. And if we compare only people who work 40 hours a week, BLS data show that women then earn on average 90 cents for every dollar earned by men.

Career choice is another factor. Research in 2013 by Anthony Carnevale, a Georgetown University economist, shows that women flock to college majors that lead to lower-paying careers. Of the 10 lowest-paying majors—such as “drama and theater arts” and “counseling psychology”—only one, “theology and religious vocations,” is majority male.

Conversely, of the 10 highest-paying majors—including “mathematics and computer science” and “petroleum engineering”—only one, “pharmacy sciences and administration,” is majority female. Eight of the remaining nine are more than 70% male.

Other factors that account for earnings differences include marriage and children, both of which cause many women to leave the workforce for years. June O’Neill, former director of the Congressional Budget Office, concluded in a 2005 study that “there is no gender gap in wages among men and women with similar family roles.” Time magazine reported in 2010 that in 98% of America’s largest 150 cities, including my hometown of Los Angeles, single women under 30 actually earned, on average, 8% more than their male counterparts.

IWF has been promoting true statistics regarding the wage gap for years, and so we're already familiar with the arguments in this piece.

We also know what is likely to happen in California, as a result of this law:

Some of these factors—quality of work, for instance—are inevitably subjective, yet trial lawyers will swoop in to turn every conceivable pay difference into a lawsuit. Employers who cannot “prove” objectively that one employee’s work was better than another’s may face costly penalties. Many will surely pay to settle these lawsuits instead of taking them to court.

All of this money would be better spent by businesses to hire more workers or raise wages, including for countless women. . . .

Such are the unintended consequences that may accompany this feel-good but ultimately foolish law. As Gov. Brown prepares to sign the California Fair Pay Act, he should ask himself a simple question: Does he really want to put women at an actual disadvantage while attempting to eliminate an imagined one?

States are traditionally considered the laboratories for public policy.

We should watch very closely what happens in California as the result of this law.