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Posts Tagged ‘Equal Pay’

An essential part of a free market economy is the price system. The competitive pricing of goods and services transmits information to producers and consumers and creates incentives for the efficient allocation of resources. Just as the circulatory system or nervous system enables our bodies to function.

And when you weaken or cripple markets with various forms government intervention (price controls, taxes, third-party payer, etc), that leads to distortions that reduce prosperity.

This is why “paycheck fairness” proposals to address the supposed “gender pay gap” are so risky for prosperity. It’s no exaggeration to say that these “comparable worth” schemes are designed to empower bureaucrats and politicians to override market forces.

What makes all this especially frustrating is there is no systemic discrimination against females in the workplace.

One of the leading scholars in this field is Christina Hoff Summers of the American Enterprise Institute. She has dissected the data and demonstrated that there is no pay gap once factors such as occupational choice and work hours are added to the equation. And now she has a must-watch video on the subject from Prager University.

All of her data is very compelling, but the most persuasive part of the video is at the beginning when she asks why profit-seeking businesses don’t fire men and hire women if there really is a wage gap.

Statists might respond that businesses are part of some evil patriarchy and that there’s some sort of oligopolistic conspiracy to forego income in order to oppress females. But if that’s what they really think, why don’t these leftists start their own businesses and take advantage of the supposed pay gap? Not only would they earn large profits, but they would also bankrupt existing firms that ostensibly are engaging in discrimination.

Sounds like a win-win, right?

And if they respond by saying that they don’t happen to have business skills because they chose to study more enlightened topics while in school, then ask them why progressive companies from France or Sweden aren’t entering the American market and earning lots of business?

Or are they part of the patriarchal conspiracy as well? Like almost all theories based on conspiracies, this is nonsense.

Let’s close with some wisdom on this issue from one of my colleagues at the Cato Institute. Vanessa Brown Calder cites a considerable amount of data on occupational choice, but also focuses on quality-of-life and family issues.

…women are considerably more likely to absorb more care-taker responsibilities within their families, and these roles demand associated career trade-offs. Sheryl Sandberg’s Lean In describes 43% of highly-qualified women with children as leaving their careers or off-ramping for a period of time. And a recent Harvard Business Review report describes women as being more likely than men to make decisions “to accommodate family responsibilities, such as limiting (work-related) travel, choosing a more flexible job, slowing down the pace of one’s career, making a lateral move, leaving a job, or declining to work toward a promotion.” It’s fair to assume that such interruptions impact long-term wages substantially. In fact, when researchers try to control for these differences, the wage gap virtually disappears. …It’s likely that other, more nuanced but documented differences, like spending fewer hours on paid work per week would explain some of the remaining five percent pay differential.

The philoso-raptor agrees.

P.S. Given its track record of shoddy and biased output, is anyone surprised that the Paris-based Organization for Economic Cooperation and Development is pushing dishonest gender pay data?

P.P.S. Even the Obama-era Council of Economic Advisers had enough integrity to disavow the feminist pay-gap numbers.

P.P.P.S. On an amusing note, here are some news reports about my interaction with the feminist left during my college years.

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I realize it’s tax week and I should be condemning our convoluted tax code and oppressive IRS.

But I can’t resist getting diverted to another topic. It’s time to debunk the notion that there is rampant sexism in the private economy that causes women to by systematically underpaid.

I addressed the issue back in 2010, citing the solid work of Christina Hoff Summers. And I cited more of her work, as well as some analysis by Steve Chapman, when writing about the topic in 2012. The bottom line is that rigorous analysis finds that the so-called gender gap largely disappears once you consider factors such as occupational choice, hours worked, and education.

I’ll add my two cents to the discussion. For decades, I’ve been dealing with leftists who repeatedly tell me that business owners are consumed by greed and put profit above everything. Yet if women truly were making less money than men for doing equal work, then why aren’t these greed-filled business owners firing all their male employees and hiring women who will work for 80 percent of what it costs to employ men? Or 85 percent? Or 90 percent?

When I pose this question, my statist friends begin to mumble and stumble, but the clever ones eventually asset that business owners are not only soulless profiteers but also malign sexists. And the sexism apparently trumps the greed because they’re willing to employ men when equally competent women would work for less.

At that point, I usually ask them why entrepreneurs (presumably women and perhaps financed by rich leftists) don’t take advantage of a huge competitive opportunity by setting up rival businesses that could hire women for less money and lure customers away from the greedy sexist firms by charging lower prices.

I still haven’t received an answer to that question.

And that may explain why even one of President Obama’s top economic advisers basically admitted that equal-pay propaganda from the left is completely bogus.

Let’s dig into the data. Mark Perry of the American Enterprise Institute does a very good job of explaining why Equal Pay Day is based on nonsensical numbers.

…the bogus feminist holiday event known as Equal Pay Day…is a statistical fairy tale because it’s based on the false assumption that women get paid 23% less than men for doing exactly the same work in the exact same occupations and careers, working side-by-side with men on the same job for the same organization, working the same number of hours per week, traveling the same amount of time for work obligations, with the same exact work experience and education, with exactly the same level of productivity, etc. …The reality is that you can only find a 23% gender pay gap by comparing raw, aggregate, unadjusted full-time median salaries, i.e. when you control for NOTHING that would help explain gender differences in salaries… Most economic studies that control for all of those variables conclude that gender discrimination accounts for only a very small fraction of gender pay differences, and may not even be a statistically significant factor at all. …As the Department of Labor concluded in 2009, “The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.” They also concluded that “the raw wage gap should not be used as the basis to justify corrective action.”

By the way, all this data and research doesn’t mean sexism doesn’t exist. I’m sure it does, and it probably goes both ways.

I’m simply saying that unjustified discrimination in a competitive market economy is expensive. People who put prejudice above profits suffer. Which is why there’s so little actual evidence to support the feminist position.

Now let’s enjoy a bit of fun. It’s always amusing to expose statist hypocrisy.

The Obama White House claims to believe in so-called equal pay for equal work. But apparently that’s only a rule for us peasants.

And Hillary Clinton doubtlessly will regale us with speeches about equal pay over the next several months. Yet she didn’t practice what she preaches.

Yes, I realize we’re all shocked that politicians like Hillary prevaricate and dissemble.

P.S. Since this is tax season, I suppose I should close with a couple of relevant items.

First, we have an update to the infamous chart on the number of pages in the tax code.

Second, we have a new video from Reason TV about the “best tax code.”

Sadly, I don’t think my tax videos will ever be that entertaining.

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President Obama and many other leftist politicians are running around the nation claiming that supposedly greedy employers are deliberately choosing to reduce their profits.

They’re not actually making that specific claim, but that’s what they’re asserting, for all intents and purposes, when they claim that women are not getting equal pay for equal work.

Inaccurate, but nonetheless clever

If genuine and pervasive sexism existed, then non-discriminatory employers could dramatically reduce labor costs – and therefore dramatically increase profits – by getting rid of overpaid male workers and hiring women. Does anyone really think entrepreneurs and business owners are willing to sacrifice big profits simply because of anti-women animus?

That’s what Obama would like us to believe. And he wants the government to have the power to second-guess the decisions of private businesses. Heck, he probably would like to make America like Europe, where there are efforts to impose gender quotas.

And one of his chief economists tried to back up the President’s claims. Here’s some of what Ashe Schow wrote on the issue for the Washington Examiner.

While detailing executive actions President Obama plans to take Tuesday regarding equal pay for women, Betsey Stevenson, a member of the White House Council of Economic Advisers, said very defiantly that…women… continue to make less than men. …“They’re stuck at 77 cents on the dollar, and that gender wage gap is seen very persistently across the income distribution, within occupations, across occupations, and we see it when men and women are working side by side doing identical work.” That sounds awfully specific. Stevenson certainly sounds like she’s saying men and women doing the exact same job are earning very different pay.

Ms. Stevenson certainly was trying to be a loyal employee.

But then something very unusual happened. A journalist actually asked a real question.

And Ms. Stevenson, who obviously didn’t want to make herself a laughingstock to her colleagues in the economics profession, was forced to admit that the President is peddling nonsense.

…as soon as Stevenson was actually questioned about the statistic by McClatchy reporter Lindsay Wise, the White House adviser crumbled, admitting her earlier comments were inaccurate. “If I said 77 cents was equal pay for equal work, then I completely misspoke,” Stevenson said. “So let me just apologize and say that I certainly wouldn’t have meant to say that.” …Don’t expect Obama to admit any of this as he travels around the country continuing to claim that women don’t earn as much as men.

So why did Ms. Stevenson quickly back down? Well, perhaps she is familiar with the work of Christina Hoff Sommers, who has explained that men and women do get equal pay when you adjust for career choices, labor supply, and other factors.

There’s lots of evidence that the supposed sexist pay gap is a political weapon rather than economic reality.

Mary Perry and Andrew Biggs of the American Enterprise Institute just wrote a very thorough debunking of the pay gap myth for the Wall Street Journal. Here are some of the key passages, starting with an explanation that the pay gap largely disappears when you make apples-to-apples comparisons.

…the numbers bandied about to make the claim of widespread discrimination are fundamentally misleading and economically illogical. …Men were almost twice as likely as women to work more than 40 hours a week, and women almost twice as likely to work only 35 to 39 hours per week. Once that is taken into consideration, the pay gap begins to shrink. Women who worked a 40-hour week earned 88% of male earnings. Then there is the issue of marriage and children. The BLS reports that single women who have never married earned 96% of men’s earnings in 2012.

Wow. No wonder Steve Chapman wrote that the left’s pay-gap rhetoric is “a myth resting on a deception.”

But there’s more.

Risk is another factor. Nearly all the most dangerous occupations, such as loggers or iron workers, are majority male and 92% of work-related deaths in 2012 were to men. Dangerous jobs tend to pay higher salaries to attract workers. Also: Males are more likely to pursue occupations where compensation is risky from year to year, such as law and finance. Research shows that average pay in such jobs is higher to compensate for that risk.

Finally, Perry and Biggs seal the argument by pointing out that discrimination doesn’t make sense in a competitive market.

…gender-disparity claims are also economically illogical. If women were paid 77 cents on the dollar, a profit-oriented firm could dramatically cut labor costs by replacing male employees with females. Progressives assume that businesses nickel-and-dime suppliers, customers, consultants, anyone with whom they come into contact—yet ignore a great opportunity to reduce wages costs by 23%. They don’t ignore the opportunity because it doesn’t exist.

By the way, this does not mean that discrimination doesn’t exist.

I’m sure there are still some employers who let sex or race play a role in their decisions. But such people are not only immoral, but also stupid. They are giving up potential profits to indulge their own insecurities.

And other employers will take advantage of their foolishness.

In other words, the free market is the best way to fight discrimination, not government intervention.

P.S. Walter Williams explains that racial and sexual profiling sometimes makes sense.

P.P.S. I explain that anti-discrimination laws can boomerang against intended beneficiaries.

P.P.P.S. There is real evidence that tall people and attractive people are paid more, though I nonetheless argue that government is incapable of addressing this issue.

P.P.P.P.S. For those who are genuinely worried about discrimination, particularly against minorities, the real issues to address are Social Security and government schools.

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Christina Hoff Summers of the American Enterprise Institute does a masterful job debunking the feminist notion that discrimination is responsible for wage differences between male and female workers. I’ll just add one observation, which is that genuine discrimination is very costly. If an employer wanted to discriminate against women (or any other group), that would mean deliberately making inefficient choices. This, in turn, would reduce the competitiveness of firms with discriminatory hiring practices. In other words, the market penalizes people who do the wrong thing. This doesn’t mean there is no discrimination. It does suggest, however, that market forces are the right solution, not coercive intervention by government:

Today is Equal Pay Day. Feminist groups and political leaders have set aside this day to protest the fact that women’s wages are, on average, 78 percent of men’s wages. …The American Association of University Women (AAUW) has enlisted supporters to wear red “to represent the way the pay gap puts women ‘in the red.’” There will be rallies, speak outs, mass mailings of equity e-cards, and even bake sales featuring cookies with a “bite” taken out to represent women’s losses to men. …this holiday has no basis in reality. Even feminist economists acknowledge that today’s pay disparities are almost entirely the result of women’s different life choices—what they study in school, where they work, and how they balance home and career. …In January 2009, the Labor Department posted a study prepared by the CONSAD Research Corporation, “An Analysis of the Reasons for the Disparity in Wages Between Men and Women.” It analyzed more than 50 peer-reviewed papers. Labor Department official Charles E. James Sr. summed up the results in his foreword: “This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.” …Women are not as ready to sacrifice their deep interests in, say, history, psychology, or public policy—“all in order to fix, sell, or distribute widgets” or “to spend the best years of [their lives] planning air conditioning ductwork for luxury condos.” Men also work longer hours and are more willing than women to take dangerous but well-paid jobs as truck drivers, loggers, coal miners, or oil riggers. …And of course women are much more involved with babies than men. According to a 2009 Pew Survey, “A strong majority of all working mothers (62%) say they would prefer to work part time . . . An overwhelming majority [of working fathers] (79%) say they prefer full-time work. …American women are among the freest, best educated, and most self-determining people in the world. It seems unsisterly for NOW or the AAUW to suggest that they are being hoodwinked into college majors, professions, or part-time work so they can spend more time with their children.

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