Friday, 25 November 2016

New Zealand is totally different from Ontario

New Zealand may be heading toward 1988-Ontario-style Pay Equity rules.

Here's The Herald's summary:
The changes will mean employees who believe they are underpaid because they do work in fields dominated by women will be able to approach their employer to raise a pay equity claim.

The Government has today announced it has accepted the recommendations from a joint working group, led by Business NZ and the NZ Council of Trade Unions, that were delivered to Cabinet earlier this year.

When putting up a pay equity claim, employees need to find another non-female-dominated job they can compare their work to.

As well as establishing a process for employers and employees to follow to address pay equity, ministers have also decided to clarify how to choose an appropriate job for comparison when making a pay equity claim.

PSA national secretary Erin Polaczuk said Cabinet had proposed a "start close then move out" mechanism, where employees must try to find a comparison in their own business, then their industry, then their sector.

She said the PSA would now raise pay equity claims for thousands of low-paid women.
I am absolutely confident that our experience will be absolutely nothing like Ontario's. I only put the Ontario experience up here as illustration of what goes wrong in other places. Here it will be wonderful, as I am certain all right-thinking people would have to agree.

On administrative costs, here's a report by Morley Gunderson (University of Toronto) and Paul Lanoie (École des Hautes Études Commerciales) for CIRANO. You should read the whole thing, so you can satisfy yourself that the clear differences between Ontario and New Zealand mean we are entirely safe. Here is a snippet.
Based on these figures, in some back-of-the-envelope calculations, Gunderson (1994, p. 88) estimated the administrative costs for the 20 percent of the persons in an establishment who may receive an award, to be approximately $750 or about 20 percent of the average award of around $4,000. That is, about 20 cents of every dollar transferred is "eaten-up" in the employer’s cost of administering the system. This may be an underestimate to the extent that it does not include the actual cost of the job evaluation procedure, or the hidden indirect cost (e.g., managerial time) or the cost to other parties. It may be an overestimate to the extent it does not net out other benefits that may result from the process. Furthermore, many of the administrative costs may be one-time only, while the pay equity adjustments may continue.

Based on her consultations across the province, Read (1996, p. 4) also indicated: "For some smaller private sector employers, the cost of compliance sometimes exceeded the actual adjustment made." That is, more than 100 percent of the adjustment would get "eaten-up" in the real resource cost of administering the system. She cites (p. 38) survey evidence from the Canadian Federation of Independent Business indicating that for small businesses the total cost of consulting fees10 averaged around $5,400, which was considerably higher than the total amount of around $4,000 that went into wage adjustments.

As an illustration of the costs incurred, we present the process that was involved in the hospital that served as one of our case studies. First, a job description had to be done for all occupations by people of the HR services. The job description was then presented to the supervisors who submitted them to all workers for approval. Four pay equity committees (one for every bargaining unit and one for non-unionised workers), each of them involving 5 or 6 persons then proceeded to the job evaluation. This took many weeks, involving a countless number of meetings. The results of the job evaluation and the consequent wage adjustment were then presented to supervisors before being posted. Once the plan was posted, HR officers had to meet a large number of workers to discuss the results and the wage adjustment they received. The pay equity law also requires that firms maintain pay equity, which means that every time a job description is changed (because of a re-engineering, because a worker uses a new equipment, etc.), the pay equity process has to be done again.

When the pay equity system was first conceived in Ontario, it is not likely that the complexities and "litigation nightmare" were anticipated11. Nor were the long delays and legal wranglings of the Tribunal over seemingly simple, but inherently complex and important matters12. Examples of issues dealt with by the Tribunal include13: the definition of the establishment and the employer; gender composition of the job; gender bias in job evaluation; appropriateness of certain male comparators; exemptions for bargaining strength; retroactivity in the wage adjustment; language difficulties in understanding the pay equity plan; disclosure of documents; the possibility of an "officially induced error" if a Review Officer gives an opinion; and the rights of employees to paid time off to participate in the Tribunal hearing.

The job-to-job comparison procedures were likely utilised because of the apparent simplicity of comparing one job to another once the appropriate comparison group was established -- not anticipating the complexity of selecting the comparison group. This could be minimised by allowing the estimation of paylines, but that too can give rise to endless technical wrangling. The problem of a lack of male comparator jobs was not likely anticipated, nor was the complexity of proportionate value methods (with their paylines) or proxy comparisons to close those loopholes. Regulations beget further regulations to close the loopholes, with the process often bordering on the impenetrable to all but a few. Of course, there is money to be made by such complexities, but that money does not go to those for whom the system was designed to assist.
The CIRANO piece concludes:
Pay equity can be a complex procedure even if it is intended to be simple. That very complexity can give rise to negative features when judged according to program evaluation procedures. Not all persons in the target groups are assisted and in a manner sufficient to fully redress their problem. Significant spillover benefits can leak to non-target groups. Otherwise similar groups can receive very different treatment. The process may foster rather than break down the sex segregation of jobs. Significant real resources can be used up in the administration and implementation of the complex procedures. Such procedures are not transparent and well understood by the parties.

Our assessment is that these negative features especially associated with the complexity of the policy are a significant barrier to the effective implementation and wider adoption of the policy. Pay equity runs the very real risk of "imploding" under its own weight. The problem is exacerbated by the fact that simple rules for its application are elusive. Rather than closing loopholes, further regulations seem to add more complexity, begetting even further regulations. The pie gets eaten up in the process of administering the pie.

These problems appear to be inherent in the nature of the policy, at least when it is applied proactively and on unit-by-unit bases, as is inevitable when applied to the private sector. This raises the danger that the legislation will be ignored because it is unwieldy, a possibility enhanced by the fact that settlements have been much smaller in the private sector than the public sector.

Pay equity was instituted in large part because of the limitations and ineffectiveness of conventional equal pay policies in reducing the male-female wage gap17. Unfortunately, we know remarkably little about the overall effectiveness of initiatives like Ontario’s pay equity initiatives. We know that Ontario is a leader in the world in the area of pay equity, and we know that its system has turned out to be complex, but we do not have an answer to the bottom-line question: has pay equity been successful in closing the wage gap or in achieving other social objectives?
They didn't have an answer to their bottom-line question in 1999 when that piece was written. What have we learned since? Here's McDonald and Thornton (sci-hub link)
Evaluating the effect of pay-equity laws is important and yet difficult as one needs to deduce what would have occurred without the policy intervention. We use a new tool, synthetic-control method, to examine the effects of Ontario's Pay Equity Act on the gender pay gap. This tool enables us to create a “Synthetic” Ontario, which resembles Ontario more closely than does any other single province. Using Synthetic Ontario to compare what actually happened in Ontario to what would have happened, we find that the act has had little or no effect on the female-male wage gap in Ontario.
New Zealand will be totally different. Here we never create systems that layer up tons of bureaucratic processes imposing massive cost for little discernible benefit, and surely that will continue to be as true as it ever was.

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