What Pay Gap?

One of the most persistent talking points of feminists and politicians alike is the gender pay gap. You constantly hear things like, “Women only make 80 cents on the dollar,” and “Women are paid 23 per cent less for the same work.” Feminists demand equal pay for equal work, and they even have the UN’s Universal Declaration of Human Rights (UDHR) on their side: article 23, paragraph 2 says,

“Everyone, without any discrimination, has the right to equal pay for equal work.”

But what does that even mean? What is equal work? Equality without any qualifiers doesn’t make any sense. Two things can only be equal in some particular attribute. For example, a rock and a bottle of water may both weigh one kilogram and therefore be equal in regard to mass, but they are also different in many other regards and hence aren’t equal with general. Since neither the feminists nor the UDHR specify what kind of equality they’re talking about, I’m going to assume they mean equality of value.

Does “equal pay for equally valuable work” make sense? The problem here is that value is subjective. Just because Alice regards two things as equally valuable, doesn’t mean that Bob has to agree. In fact, people differ a great deal in what they value how highly. Thus, there is no objective way to say that two particular labour services are of equal value.

The question then is: whose valuation matters? The answer should be quite clear. Since the employer is the one who buys labour services, he is the one who decides how valuable they are to him. The employer is the consumer of labour, so it should be he, and no one else, who decides how much he is willing to pay. An outside observer isn’t able to assess the value of a particular employee to the employer because no third-party knows as much about the employer’s preferences as the employer himself.

Thus, no one can ever reasonably accuse an employer of paying unequal wages for equal work. If Carl the Capitalist pays Alice less than Bob, then that must mean he values Bob’s work more highly (or else that Bob did a better job negotiating his wages, but then the fault for being paid less lies squarely on Alice and she has no grounds for complaint). Maybe Carl’s assessment is faulty. Maybe his assessment of Bob’s work being more valuable is just due to ignorance or fallacious reasoning and if he knew and understood all the relevant facts, he would actually prefer Alice’s work. But an outside observer can’t know that. An outside observer who suspects that Carl isn’t taking into account all of the facts can of course go to Carl and point this out to him, but in the end Carl is the only one who can properly assess the value of his employees to him.

But the proponents of equal pay insist that there are objective criteria by which the value of workers can be measured, such as education, previous work experience, and seniority. It’s true that these factors can be objectively measured, but they do not directly determine value. They will influence the value of an employee to any reasonable employer, but no outside observer can determine by how much. They are also merely crude statistical tools. It’s entirely possible, for example, that a highschool dropout is smarter and better educated than someone with a university degree. Most university graduates are better educated than most highschool dropouts, but not all. An employer who knows his employees well can make this evaluation; an outside observer using only objective and easily quantifiable data cannot.

There are also many other considerations for how valuable a worker is to an employer. Maybe Carl just likes Bob better and enjoys his company. Maybe Bob gets along better with his colleagues and superiors. Maybe Carl judges Bob to be more competent at his job. Maybe Bob is good about helping out his colleagues. Maybe Bob is more reliable. There are a hundred possibilities here. No outside observer could ever hope to recognize, let alone objectively quantify, all relevant factors.

To illustrate the absurdity of the position that value can or should be judged by outsiders based on objective criteria, let’s consider a different market. Suppose Alice wants to buy a laptop computer. After some deliberation, she decides on an Apple MacBook Air. At this point, Olivia the Outside Observer comes in to stop Alice. After all, there is a product from a different brand that has the same specs but is cheaper than the MacBook. This, Olivia says, is discrimination, and Alice shouldn’t pay unequal money for an equal product.

Of course the two different laptops are not equal in value to Alice. She prefers the Apple product, even though it is more expensive. Maybe all her friends also own Apple products and she doesn’t want to stand out, or maybe she regards it as a status symbol. Maybe she prefers the design, or maybe she thinks that the MacBook will be easier or more comfortable to use. I don’t think anyone would want to forbid her from buying the product she prefers, but if the “equal pay for equal work” advocates were consistent, they would have to condemn Alice’s decision. If this principle should apply to the sale of labour services, then why not to all other goods and services?

Another possibility to determine whether work is equal is to interpret “equal” as “equal in regard to market prices.” But this avenue of attack doesn’t work at all for the equal pay crusaders. The wage a worker is paid is the market price. Thus, under this interpretation of equality, there is always equal pay for equal work.

If Alice feels her wage is below the market value of her work, she can always find work elsewhere, working for someone who values her services more highly. If she can’t find anyone else who’s willing to hire her at a higher wage, then she was wrong and Carl did not in fact pay her less than her market value.

No matter from what angle you come at it, it’s impossible to determine what equal work is, using objective criteria. Legislation that forbids unequal pay for equal work is an abomination, spawned by economically illiterate demagogues trying to appeal to ignorant, irrational voters. All these laws do is to intimidate and bully businesses and strip away property rights from business owners.

Feminists keep touting the wage gap, but it’s a meaningless statistic when it comes to determining whether there is unfair discrimination. Men do earn more money than women on average, both in terms of yearly income and in terms of hourly wages. According to a 2009 report by the U.S. Department of Labor, women working full-time had a 20.4% lower median annual income than men working full-time [1]. In the EU, the pay gap is measured as the difference in mean hourly wages and was estimated to be 16.2% for 2011 [2].

This is an interesting piece of trivia, but nothing more. There are fundamental differences between men and women, so no one (except reality-denying gender ideologues) should be the least bit surprised to see a difference in average wages. When you adjust for a few statistical factors such as choice of industry, number of hours worked, and number of years on the job, you get what is called the adjusted wage gap.

The U.S. Department of Labor has calculated the adjusted wage gap to be between 4.8% and 7.1% for the U.S.A. [1]. The German Institut für Wirtschaftsforschung (Institute for Economic Research) has concluded that the adjusted wage gap for Germany is less than 2%, while the raw wage gap is 25% [3]. But these figures do not show anything about unjust discrimination. No matter how many factors you take into account and how many statistical regressions you run, there still isn’t any objective way of measuring value.

Thus, all the blabber about wage discrimination against women is baseless speculation. I’m sorry feminists, but hurt feelings, indignation, and defunct sociological theories are not admissible as evidence.

Given the wide-spread belief in and condemnation of wage discrimination against women and given the many laws against discrimination which are almost exclusively applied in favour of women, there is no reason at all to believe that women are getting the short end of the stick when it comes to wages. On the contrary, it’s even quite likely that there is in fact unjust discrimination against men.

Companies have to be very careful not to be accused of wage discrimination. Even if an allegation isn’t proved in court, the allegation alone can do damage to the company’s image. Since there will never be any lawsuits for wage discrimination against men in the current climate, companies are incentivized to err on the side of caution, i.e. on the side of discriminating against men.

There is a simple solution for this whole mess: get rid of laws requiring equal pay. Get rid of all laws which prohibit discrimination in the use of private property. Get the government out of private businesses and allow free individuals to make voluntary agreements. Then we can be certain that whatever the differences between the wages of men and women may be, these differences will be the result of the freely expressed preferences of the individuals involved, rather than the whims of feminist bureaucrats.

References:

[1] http://www.consad.com/content/reports/Gender%20Wage%20Gap%20Final%20Report.pdf

[2] http://ec.europa.eu/justice/gender-equality/gender-pay-gap/situation-europe/index_en.htm

[3] http://www.iwkoeln.de/de/presse/veranstaltungen/beitrag/pressekonferenz-beschaeftigungs-und-karriereperspektiven-von-frauen-102502, please note that the methodology used is different from the U.S. report, so the numbers are not directly comparable

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