Why Are Business Owners Blamed For the Gender Pay Gap?

How many of you have paid someone less because of their gender? Didn't think so.

learn more about Ray Hennessey

By Ray Hennessey

Opinions expressed by Entrepreneur contributors are their own.

OK, business owners, let's have a show of hands. How many of you pay the women who work for you less than the men for doing the same job?

Anyone? Anyone?

Of course not. For one thing, it's illegal. The Equal Pay Act in 1963 prohibited employers from paying less based on gender. More importantly, though, it is simply bad business sense. In a free market, companies rely on the quality of their workers to thrive. They need the best engineers, the best marketers, the best salespeople, the best managers and the best thinkers around them. Most are willing to pay top dollar for top talent. Gender plays no role in how much that paycheck is.

Related: The Myth of the Have-Nots

And yet we continue to hear the business community criticized for the so-called gender pay gap. Women, we are told, make 77 cents for every dollar earned by a man. That gap is unfair and must be eradicated. To do that, we must punish businesses that pay someone less simply because of which restroom they use.

The trouble is, that statistic isn't true and doesn't even take into account the realities of the workforce. You come up with that gap figure through the simplest of math. Take all the wages earned by men, then subtract all the wages earned by women, and -- voila! -- we have a gap.

But there are plenty of reasons why that gap exists. There are differences in career paths, particularly when you see gender differences in college majors. Many women choose college majors that lead to professions that naturally pay less. Then there are life choices. Women have children and often take time off from their careers -- and earning ability -- to raise them. That doesn't mean that they lose out completely financially, either. There are ways to manage that process to ensure they don't lose ground in pay, but it is natural that people out of the workforce for a period of time, or who are working part-time, would make less.

Related: Women, Are We to Blame for the Glass Ceiling?

What we don't see, however, are businesses wilfully paying one gender less than another. Yet, the policy response is to punish business, not explore and accept the sociological underpinnings of any mythical gap. Take the political theater this week over the Paycheck Fairness Act, the Democrat-sponsored bill that would increase penalties for violations of the Equal Pay Act. Right now, employers can battle claims of unfair pay by citing factors other than gender for paying someone less money. The Paycheck Fairness Act, which was blocked by Republicans, would have required that employers use "bona fide" factors, like experience, to make their case. What is considered "bona fide" is narrowed, and takes away a lot of the hiring flexibility employers now have.

Worse, the bill raises the financial stakes for the businesses, by allowing more damages in lawsuits and opening up these cases to class-action status. It is a boon for lawyers, and a cost nightmare for American companies of all sizes.

The academic research into the pay gap is not turning up reams of evidence that the business community is intentionally paying women less, so why is there a need for more law and regulation targeting them? And, if there are real, sociological reasons for pay differences, is this even a gap worth minding?

Of course not, but the debate is brought to you by the same people who say that businesses don't pay anyone enough, so we need to shame companies into raising wages, or, G-d help us, pass laws that require higher pay. All the while, we lose sight of the decisions the employees themselves, who are making choices in their lives and in the way they work that affect how they are compensated.

Worst of all, we know that, despite historically high joblessness, many independent businesses are stuggling to find qualified candidates to fill their open positions. Entrepreneurs have problems building their teams. In many cases, pay is the least of their worries.

Yet, these entrepreneurs and business managers are the ones getting the blame and facing the legal and regulatory risk.

It's time to face facts. Most successful businesses pay fairly and pay people what they are worth. They are gender-blind, color-blind, religion-blind -- in fact, blind to everything but performance. When you work hard and work successfully, the pay follows. That is how the true free market regulates commerce. That's something men and women can surely agree upon.

Related: How the New Obama Overtime Rules Will Squelch Opportunity

Ray Hennessey

Former Editorial Director at Entrepreneur Media

Ray Hennessey is the former editorial director of Entrepreneur.

Related Topics

Editor's Pick

This 61-Year-Old Grandma Who Made $35,000 in the Medical Field Now Earns 7 Figures in Retirement
A 'Quiet Promotion' Will Cost You a Lot — Use This Expert's 4-Step Strategy to Avoid It
3 Red Flags on Your LinkedIn Profile That Scare Clients Away
'Everyone Is Freaking Out.' What's Going On With Silicon Valley Bank? Federal Government Takes Control.
Leadership

How to Detect a Liar in Seconds Using Nonverbal Communication

There are many ways to understand if someone is not honest with you. The following signs do not even require words and are all nonverbal queues.

Business News

Carnival Cruise Wants Passengers to Have Fun in the Sun — But Do This, and You'll Get Burned With a New $500 Fee

The cruise line's updated contract follows a spate of unruly guest behavior across the tourism industry.

Business News

Amtrak Introduces 'Night Owl' Prices With Some Routes As Low As $5

The new discounts apply to some rides between Washington D.C. and New York City.

Business News

Meta Employees Interrogate Mark Zuckerberg in Town Hall Meeting

The CEO fielded tough questions from rattled staffers at an all-hands meeting.

Business Solutions

This Highly Rated App Could Help Business Owners Stay Organized

Get your business in order with this personal organizer app on sale for $60.

Living

8 Things I Discovered While Working With Affluent Clients in New York City

After a decade working with the 1%, I learned that they have common traits.