“Equal pay bill” may increase unemployment among women

Summary of this report

• The Lula government sent the bill baptized by the Executive as “PL for equal pay” in March, in reference to International Women’s Day. The House approved the proposal on May 4.
• The bill significantly increases fines in case of proven wage discrimination, in addition to including compensation for moral damages, and creates more obligations for companies.
• Economists claim that, if it becomes law, the measure would have the opposite effect, inhibiting the hiring of women due to the companies’ fear of labor complications.
• Deputies opposed to the proposal claim that despite the damage to women, parliamentarians voted mostly in favor of the issue for fear of being seen as contrary to the rights of the female population.

In early May, the Chamber of Deputies approved a bill authored by the Lula government, announced with the aim of guaranteeing equal pay for men and women. The text, if also approved by the Senate, will bring changes to the Consolidation of Labor Laws (CLT), the main Brazilian labor law.

The text was approved with 325 votes in favor and 36 against the final opinion of deputy Jack Rocha (PT-ES), defined after agreement between party leaders. In summary, the bill proposes to ensure that there is no wage difference due to gender, race or ethnicity discrimination.

Such a mechanism is already foreseen in the CLT. The proposal, however, seeks to increase fines in the event of proven salary discrepancies – in these cases, currently the labor legislation provides for payment of salary differences plus a fine of 50% of the benefit limit General Social Security System (R$ 3,753.74 in amounts current).

The new proposal provides, in addition to the payment of wage differences, a fine in the amount of ten times the highest salary paid by the employer. In addition, it establishes compensation for moral damages to be paid to the employee. Under the terms of the bill, companies with more than 20 employees must periodically publish the so-called “salary transparency reports”, which would be used to determine any salary discrepancies. If you fail to submit the report, the fine to the employer would be five times the highest salary paid by the company, increased by 50% in case of recurrence.

Although the approval in the Chamber was celebrated by the government – especially by the Minister of Women, Cida Gonçalves –, according to sources interviewed by the report, the measure could have the opposite effect and generate economic losses for the female population. By increasing bureaucracy, possible liability and fines for hiring women, the determinations can lead companies to see hiring men as legally safer, which would discourage the formal admission of women, increasing unemployment and informality of the female population.

For an economist, impacts of the “PL of equal pay” are unfavorable to women

As explained by economist Vladimir Fernandes Maciel, PhD in Public Administration and Government from FGV-SP and coordinator of the Center for Economic Freedom at Mackenzie University, in the best of scenarios the measure would be innocuous, since the CLT already ensures mechanisms that prohibit wages differences between men and women for exercising the same function in the same company. On the other hand, the economist points out as a reverse effect of the law a greater fear of companies regarding hiring women.

“The agenda is fair, because in fact the issue of productivity for many functions tends to be the same. But there is another side: the cost to employers for women and men is not equal. You can have equal productivity, but you don’t necessarily have equal costs. When it ends up leveling off, the tendency of the contractor is to hire fewer women”, says Maciel.

“In economics things are adjusted by price and quantity. If the law stops the price, which is the remuneration, it will adjust in quantity, and then it will induce discrimination in the form of hiring that favors male professionals in some segments. In this case, it will reinforce discrimination in the labor market, not by price, but by quantity, ”he explains.

For Maciel, the more the issue is subject to regulation, the tendency is to worsen the situation of women in the labor market. “The consequences would not only be hiring fewer women, but would also lead them more to informality, that is, without any legal mechanism of protection, without unemployment insurance or maternity leave, none of that”.

Lawmakers opposed to the bill say the government’s narrative impeded debate

For deputy Adriana Ventura (Novo-SP), who voted against the bill, the proposal was conducted in a populist manner by the government under the label “PL for equal pay”, which would have left many parliamentarians afraid to vote negatively to the project and being labeled as contrary to women’s rights.

The Executive made a big bet on this issue: the proposal was forwarded with a request for constitutional urgency, that is, the bill gained priority over the others and, if it was not voted on within 45 days, it would start to lock up the agenda of the Legislative until the issue was debated. The Lula government had already requested constitutional urgency for other proposals, such as the one that provides for the creation of the ‘National Marielle Franco Day’ – the request was withdrawn weeks later.

“It is a demagogic PL that was exploited by the government in March, on women’s day. The government claims that it was based on the IBGE study [que aponta que, no Brasil, mulheres ganham cerca de 20% a menos do que homens]. But there are reasons for this difference – sometimes because we have less time to work due to double shifts, different choices or, in some cases, not working as many overtime hours”, he says.

In fact, according to IBGE data for the 4th quarter of 2021, the number of hours worked per week was 37.3 among women, on average, and 41.9 among men. In addition to these issues, Fernandes Maciel explains that although the nominal salary is obligatorily the same, the net salary can vary between men and women because many companies have different discount and benefit policies that occasionally make women have a lower net income.

“If due to maternity, for example, the woman uses a health plan with co-payment more than the man, she will have a greater discount at the end, even if the registered salary is the same between both. On the other hand, companies can stipulate a minimum number of absences for a given annual bonus; if the woman needs to be more absent from work because she has to take her children to the doctor, for example, or for biological reasons, men end up having more chances of having the bonus”, explains the economist.

Deputy Gilson Marques (Novo-SC), another to vote against the bill, reinforces the damage to the female workforce in the country if the proposal becomes law. “Unfortunately companies will choose not to take that risk by not hiring women. In the end, the intention of the project is good, but the result is bad”, he points out.

“Under the terms of this law, I, as a businesswoman, would see more advantage in hiring men. This will take many women out of the job market and, as a woman, I am outraged by the approval of such a stupid law”, says Adriana Ventura, who is a businesswoman and holds a PhD in Business Administration.

The parliamentarian claims that since the vote she has received a series of offenses on the grounds that she would have been contrary to the female population. She also points out that many parliamentarians did not even know the terms of the proposal and voted in favor for fear of public opinion.

Gilson Marques also mentions the wave of persecution – by activists and part of the press – against parliamentarians who voted against the matter. “It is a very bad project and very difficult to vote against. Need to explain, read, reflect on the result. It’s much easier to say ‘I’m for women, I’m going to vote for them’. It is obvious that this will harm women a lot, but the narrative that this project was about equal pay caught on very strongly, and the parliamentarians, in order not to get into trouble, voted in favor of it”, says the deputy.