More lawsuits, regulations, and paperwork: That's how progressive activists propose to help women earn more through the Paycheck Fairness Act. This mislabeled bill is sold as a way to end discrimination against women, but this ignores that discrimination is already illegal. Worse, the bill’s proposed new red tape and associated specter of more lawsuits would encourage employers to standardize pay scales and offer less flexibility—exactly what most working women don’t want.
That doesn’t mean that Congress should give up on the cause of making sure that women’s earnings are treated fairly and helping women earn more.
Congress should consider how tax policy and the structure of our safety-net programs discourage women from working, which depresses their long-term earnings potential. For example, under current law, married couples’ earnings are taxed as a unit. That means that if one spouse who hasn’t been working outside of the home seeks employment, the first dollar she earns is taxed at the same rate as the other spouse’s last dollar. Marginal tax rates for high-earner households can be as high as 50 percent, when federal, state, and local taxes are included.
Stay-at-home parents who otherwise would like to restart their careers often decide it’s not worth it to re-enter the workforce when the payoff is so low. And, of course, most stay-at-home spouses are women. Discouraging these women from seeking employment leaves them more financially vulnerable in the event of their spouse’s death or a divorce. That’s simply bad government policy.
It’s not just these individual women and their families who lose out when they shy away from entering the workforce because of high marginal tax rates. Often, it’s highly educated and highly skilled women who decide working outside the home doesn’t make financial sense. Our economy and society miss out on their contributions.
Former small business owner and tax reform activist Frayda Levin explained: “Throughout my career, I’ve known many highly-educated women—women with MBAs who had been leaders and entrepreneurs—who took time out of work for children, intending to go back but never did for this very reason. Such a waste of their education and tremendous skills!”
Women at the other end of the pay scale also often face high marginal tax rates as social safety-net programs phase out as income grows, creating an incentive to forgo paid work and to keep receiving government support. They also often face needless barriers to entering professions like cosmetology, home design and hairdressing because of occupational licensing laws. These licensing rules vary wildly by state, and many lack any legitimate public safety justification.
The Institute of Justice noted that there are 73 professions with licensing requirements that exceed those required for emergency medical technicians. EMTs often literally hold someone’s life in their hands, acting as first responders who must resuscitate and stabilize patients before they can reach hospitals. As the Institute for Justice puts it: “For perspective, while the average cosmetologist must complete 386 days of training, the average EMT must complete a mere 34… Such discrepancies do not mean that EMTs should face steeper requirements. Instead, they suggest barriers for other occupations could be safely lowered.”
There is simply no legitimate policy reason that cosmetologists, hair dressers, interior designers, and manicurists should face costly and burdensome hurdles before offering their services to customers. Such barriers are unfair to women, particularly those with lower incomes and less financial resources, who are less able to afford the tuition payments and associated fees.
But it’s easy to see why policymakers like occupational licenses: They are a way for them to favor some groups—those already in a profession who benefit from less competition as well as those who run the required training programs—and bolster government budgets. Unfortunately, they discourage work, entrepreneurship and career building, all of which are the real keys to building true financial security.
This is what’s truly unfair to women and what government should be seeking to correct. The Paycheck Fairness Act doubles down on increasing government power, imposing new rules and reporting requirements and increasing the likelihood of lawsuits. This isn’t what’s needed to help women thrive: We need policies that are fair to women who want to find paid employment, so they will be more financially secure, and our entire society will be richer.