03 June 2014

Obama on Equal Pay for Women

Stephen Kershnar
Equal Pay Rhetoric: Political Silliness
Dunkirk-Fredonia Observer
May 16, 2014

Recently, President Obama said, “Today, the average full-time working woman earns just 77 cents for every dollar a man earns. … [I]n 2014, that’s an embarrassment. It is wrong.” He used this to justify an executive order that forced federal contractors to allow employees to discuss their wages. The Senate has also been considered the Paycheck Fairness Act. This bill would allow women to sue for unlimited compensatory and punitive damages for pay discrimination and would make it easier for class-action lawsuits about such discrimination. This movement is a mistake in fact and theory.  

Obama’s and the Democrats’ motivation is political. Single women are a big part of the electorate (25%). Since 2000, they are growing more than twice as fast as married women. Single women just love Democrats. In 2012, they favored Democrats over Republicans 67% to 31%. Obama and company think this push for pay equality will help them turn out single women.

There are several reasons to reject this movement. First, the relevant pay gap between full-time workers is not 77 cents. Writing for the Independent Women’s Forum, Charlotte Hays points out that this number (and the related the Bureau of Labor Statistics estimate of 81%) leaves out relevant differences. Consider hours worked. In 2012, men were roughly twice as likely as women to work more than 40 hours a week. Women who did work a 40-hour work week earned 88% of what men earned. Next consider marriage and children. Again in 2012, Hays points out, single women who have never married earned 96% of men’s earnings.

Also, Cornell economists Francine Blau and Lawrence Kahn point out that women have less full-time work experience (on average 3.5 fewer years). They also have more discontinuous careers than men due to marriage and children. These differences, Blau and Kahn argue, make it likely they invest less in developing their work skills (for instance, less on-the-job training). They further note that the sexes tend to choose different fields. Men are more likely to choose blue-collar jobs (for example, construction); women are more likely to choose pink-collar jobs (for example, clerical work). Blue-collar jobs usually pay more. Men are also more likely to be in a union. Blau and Kahn speculate that because women work harder at home than men, they might work less hard at work. If one group works fewer hours, has less years of work experience, invests less in skill development, and chooses lower paying fields, it stands to reason that they get paid less.

Second, if we’re worried about pay gaps, the gender gap should not be a priority. Forbes writer Kyle Smith points out that Latino men in the U.S. make only 77% of what other workers (men and women) make. Latino women make even less (68%). In contrast, Asian men make a whopping 37% more per hour than other Americans. He notes that no one is pushing a Latino Pay Equality Act or Asian Men’s Pay Reduction Act. Note that given the limited amount of wages a business can pay out without going under, paying one group more (for example, Latino women) means paying another less (for example, Asian men). I doubt the American left thinks that Asian men should be explicitly forced to hand over some of their income to Latino women.     

Even worse, Smith notes, food preparation and service workers make 23% of what aerospace engineers make and 20% of what lawyers make. Apparently, the President and Democrats don’t love them as much. If you argue that these differences are the result of differences in education, training, hours per day or year, responsibility, and so on, then these differences are also relevant to the gender pay gap.  

Third, if women really did get paid 77% for the same work as men, this gap would not last. Firms would hire lots of women as a way to sharply reduce their labor costs. This would allow them to lower the cost of their goods, which would then undercut the discriminatory firms, driving them out of business. This is similar to how basketball teams that discriminate against black players would lose games and fans and later go out of business.   

Fourth, if we are to make sense of the notion that one worker deserves more pay than another, and I doubt we can, desert likely depends on what a worker contributes to others. One person does not deserve more money than another merely for working harder or sacrificing more. If one worker uses a shovel to dig ditches and another uses a backhoe, the latter deserve more pay because he dug more and better ditches, even though the shovel-user worked harder. But what a worker contributes is best measured by the market price for his work. This is because what a person contributes is a matter of what he produces and how much it costs to replace him. This is what the market focuses on. It is far from clear that the market is biased in assessing what men and women contribute given the differences in hours, experience, and skill.      

The pay-gap argument is unconvincing. Long ago, the labor market would have eliminated such a gap. Instead, it should be understood as the latest dishonest attempt to grab single-women voters.     

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