Wednesday, 20 June 2018

Another Cracking Policy That Will Do More Harm Than Good

We just recently learned that big business bosses will be forced to justify salaries under new government plans, which include gender pay gaps, top end salaries, and also parental leave policies - the whole shebang. Not only is this is a terrible idea because of the misunderstanding of the facts - it is a potentially damaging idea that will probably harm those it seeks to help.

What's behind the insistence that big companies are now mandated to calculate and publish their ‘pay gap stats’ is the spurious belief that there is an unfair pay gap between men and women (there isn't!) and that the firm's top earners are riding roughshod over the lower earners in the company (they are not!).

Not only have these politicians shown they don't have a very good eye for facts - what's more, even if it were true that there is an unfair gender pay gap or an unhealthy stratification, this policy is too low-resolution to get to the heart of it. Simply getting firms to publish their pay stats won't get to the crux of why, when there are differences, those differences exist. Only by comparing jobs like for like can this policy be illuminating - and this latest idea will not achieve such a thing.

A firm that publishes the mean and median salaries of the men and women in their workforce will omit many vital factors that determine pay, such as experience, qualifications, risk-taking, scalability, and several other minutia areas of the remit. A proposal that looks to redress what it thinks are illegitimate causes of a pay gap that are actually legitimate causes would do more harm than good. 

But that's not all of it - unfortunately, such an injudicious policy may well come with another unintended consequence - one that could actually disadvantage women in the workplace by skewing employer incentives to act against women.

A firm that is forced to demonstrate a 'fair' balance of sheet of equal pay when there is currently a 'fair' balance sheet of sometimes unequal pay is not going to help women, it will only harm both women and men, because some of the important factors that determined legitimate unequal pay (experience, risk, working patterns, qualifications, different priorities, etc) and some of things that determine what people value from a job (flexibility, shorter hours, career breaks, reduced responsibility, working from home) will be undermined.

It will be yet another example of a deleterious effect that comes when politicians stick their noses in where they do not belong.