My favorite working woman pointed me to “Fair Pay Isn’t Always Equal Pay”, an Op-Ed in the New York Times arguing against a proposed new federal law that would create new ways for women to sue their employers. I thought the article, by Christina Hoff Sommers, was weakly argued. She did not point out that if women could be hired more cheaply than men, any profit-minded employer would have a 100 percent female workforce. President Obama called it “a common-sense bill”, apparently. I wonder if this reflects the fact that he has never held profit-and-loss responsibility in a private business (he did spend one of his 49 years working an entry-level job at a for-profit corporation, but the rest of his working life has been in non-profit or government jobs). I’ve found that folks who never had P&L responsibility anywhere are simply unable to imagine what it would be like to start or operate a business. People who’ve been employees or managers all of their lives tend to focus on employees and managers rather than customers or the financial health of the enterprise.
11 thoughts on “Equal Pay for Women”
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Not accurate. He worked for three years in a for-profit law firm.
http://blogs.wsj.com/law/2008/01/04/barack-obama-was-once-a-lowly-law-firm-associate/
Spain, where I live, will come to a grinding halt on September 29, as workers around the country enjoy an extra day of holiday, in observance of the “national general strike”. They are protesting the labor reforms passed earlier this year by the government, as a last desperate response to the economic crisis.
These reforms include some unthinkable injustices. For example, workers fired or laid off will only be entitled to a severance payment equivalent to 22 paid days for each year they’ve been with the company, rather than, if I recall, close to 30.
(As a compromise, the government is considering passing a law that will require businesses to continue to pay the salaries of employees who need to stay at home (even medium term) with ill family members.)
Something I’ve never understood — A person in Europe can take a risk, and start a business. If the business does well, such that new jobs are required, society applauds and does little to impede ones ability to hire. However, when the time comes that a given position is no longer needed (for whatever reason), society suddenly declares its conclusion an injustice, providing extensive “protection” for the job holder, and severely penalizes the businessman. Where is the logic in that?
Do associates at law firms bear P&L responsibility?
I must admit that I also have thought along the same lines, but the concern I have is “where is the empirical evidence?”
Which is to say, it does seem there have been periods where there was employment discrimination against women and various minorities such as blacks or hispanics or asians. And I have not seen any stories, and would contend there are no significant stories of a company having decided to hire all women or all blacks or all black women etc. during those periods, and that company then outdoing its competition.
So why aren’t there these stories? Can one contend there was never a period of employment discrimination? Why were there no employers wise enough to exploit it? If there were such employers, where are their success stories?
I am not saying that government pay arbiters are the solution, but it seems false to contend that an efficient market is solving this either.
Brad: I believe that toward the end of the 19th century there were contractors, especially in the south, who hired a mostly black workforce of carpenters, plumbers, etc., and were in fact able to attain a competitive advantage by doing so. Trade unionization put the brakes on this practice, however, as the white-controlled unions were able to force employers to hire an exclusively white workforce in the more highly paid skilled trades.
http://en.wikipedia.org/wiki/Trade_union#AFL-CIO talks a little bit about the exclusion of blacks by labor unions. Also see “Racism, Railroad Unions, and Labor Regulations” by a GMU law school professor.
In the West, the discrimination was against Chinese workers, resulting in low wages. According to http://www.cis.umassd.edu/~gleung/nacaf/Timeline.htm , the railroad construction workforce was 90 percent Chinese towards the end of the construction of the Central Pacific.
Companies were not slow to notice the availability of low-cost high-quality labor in China starting in the 1980s when the changed political situation made it practical to do business in China. If a deep well of low-cost high-quality labor existed right here in the U.S. (e.g., underpaid women), you would think that it would be tapped by a profit-minded business anxious to avoid the 12-hour flights and language difficulties.
I would contend the use of the chinese in the west was more an exploitation of the low cost of immigrants (which has indeed taken place for all of history) than it was an exploitation of the low cost of a particular race. In the west, the easy-to-import population was Asian. In the East it was Irish and Italian, but not African.
Whether women are underpaid today or not, there is little doubt about the situation decades ago, where it was overt policy to pay a man more, and to give a man a raise when he got married but expect the woman to leave the firm when she got married or had children. Some professions had very few women for no particular reason, and some had lots of them just because of tradition, not the hiring of the most cost effective worker for the job as a rational actor would do.
Brad: Regardless of the reason for the Chinese workers being available cheaply in the 19th century U.S. West, they were cheap to hire. Their prevalence on the railroad projects shows that businesses are not shy about finding the lowest cost possible for labor. Your unreferenced assertion that it was a widespread “overt policy” to pay a man more “decades ago” is not very useful unless we know who the employers were. Until the Gerald Ford Administration and Congress began to deregulate the U.S. economy, a tremendous number of large enterprises were not subject to market competition and/or were hamstrung by unions. What GM, a trucking company (see http://www.lawdog.com/transport/tp1.htm ), the phone company (http://en.wikipedia.org/wiki/Bell_System_divestiture), or a railroad did in the 1950s is not evidence of how a business in a market economy with a free labor market will behave.
Quote from Alan Greenspan, The Age of Turbulence: “Townsend-Greenspan was unusual for an economics firm in that the men worked for the women…. My hiring of women economists was not motivated by women’s liberation. It just made great business sense. I valued men and women equally, and found that because other employers did not, good women economists were less expensive than men. Hiring women did two things: it gave Townsend-Greenspan higher-quality work for the same money, and it marginally raised the market value of women.”
This was 1976, admittedly an incredibly long time ago.
In looking at this situation the work that’s been done in behavioral economics comes in handy. Anyone whose done much reading in the field or has lived through the last ten years knows that crowds can act irrationally. In hindsight, investing in CDOs or dot coms made no rational sense. Yet plenty of intelligent, well educated people did it.
In hiring, the same type of irrationality creeps in without people even being aware of it. Studies show, for example, that tall people make about 10% more than other people and that CEOs are disproportionately tall. Good looking people also make more money even in professions where looks are irrelevant. This happens not because people mean to discriminate. Most people don’t. The problem is that just as perceptual biases occur in investing they also occur in hiring.
Those biases don’t have to be big to add up. As Virginia Valian’s book, Why So Slow, points out, just a small amount of bias in many decisions can add up to significant bias overall. (To put it mathematically, it works like compound interest. An interest rate of 5% a year doesn’t amount to a lot of money. But compounded over 30 years, it’s a tidy sum.) So lets say that say that on average in hiring and promotions decisions there’s just a 5% bias against women or Latinos. Over the course of a 30 year career that can really add up. And the statistics suggest that it does.
fse: I remember that quote from Greenspan’s book also. I think it proves my point, which is that when something is mispriced in a market economy there will be business people trying to take advantage of that mispricing until eventually the pricing error disappears (i.e., an arbitrager cannot make the same trade every month forever).
jd: There is some evidence of a correlation between good looks and intelligence: http://www.washingtonpost.com/wp-dyn/articles/A64857-2004May28.html
A foolish crowd rushing into CDOs isn’t quite the same as a business in a competitive market choosing to hire high-cost workers over low-cost workers with the same skills and effort/energy.
According to Score.org, as of 2005, “Women-owned businesses account for 28 percent of all businesses in the United States and represent about 775,000 new startups per year and account for 55 percent of new startups.”
It looks like the number of women-owned businesses is increasing. At some point, will the number of businesses owned by women be larger than those owned by men – and will that have an impact on the issue at hand?