Are Women Underpaid?
By Ross G. Kaminsky
My friend Prof. Don Boudreaux, Chairman of the Department of Economics at George Mason University, recently wrote about proposed "pay equity" legislation. While I agree with Don that such legislation is ignorant and dangerous, I took issue with him on his description of women as "underpriced resources". I need to clarify that after writing my note to Don, he said that he was simply making fun of Obama and Harkin, and that he agrees with my views. That makes sense, since Don is almost never wrong (although we disagree with some frequency on immigration.)
So here is what Don wrote:
Senators Barack Obama and Tom Harkin assert that women are consistently underpaid ("Obama's 'Fair Pay' Foul," April 29). They should confirm their sincerity not by sponsoring "pay equity" legislation that imposes costs on others but, rather, by opening businesses that hire America's underpaid women.
Such businesses will profit handsomely by taking advantage of these underpriced resources and, at the same time, put upward pressure on women's wages - soon bringing women's pay into line with women workers' true worth.
And here is my response to Don:
As a trader, I know that markets aren't truly efficient, but I do believe that they are very close to efficient in the long-term. Therefore, if the employment marketplace pays women something less on average than it pays men, that does not mean that women's labor costs are "underpriced resources". They are, for whatever reason, a resource that the market values less.
It is like saying that a topaz is underpriced compared to a ruby, even though it's harder than a ruby. No, it is priced as people value them.
There are many reasons to suppose that women might be paid less, including likelihood to miss work for illness or pregnancy, desire for more flexible working hours and maternity leave, higher health care costs, higher risk of spending money to train a woman and then lose her to motherhood, and, until fairly recently, likelihood of less education.
Business are (generally) profit-maximizing enterprises. If they could make more net profit by hiring women than men, adjusted for the sorts of issues (essentially about long-term efficiency) I describe above, they would do so, and the price for women's labor would rise to equal or surpass the cost of hiring men. The fact that that has not happened does not mean there is some sort of conspiracy against women.
In the first half of 2006, the unemployment rate for women was right on the national average, at 4.7%.
At this point, women are earning more than 50% of bachelor's degrees and getting more and more high-paying management jobs. (Labor statistics show a clear correlation between having a college degree and increased median earnings, as well as higher employment rate, although there is some academic debate about whether those increased earnings actually justify the cost of college!)http://www.dol.gov/asp/media/reports/workforce2006/ADW2006_Chart_Book.pdf
The so-called "pay gap" is the smallest it's ever been as women (and I'm broadly generalizing here) have changed from their traditional roles and have instead focused more on career and education than stay-at-home motherhood. Here's a fascinating piece of information from the Department of Labor: Over the last two decades, the proportion of men with ten or more years of employment with their current employer has declined for all age groups. For example, among employed men age 40-44 years, 51.1 percent had worked for their current employer for at least ten years in 1983. In 2004, the proportion was only 36.2 percent. For women, changes over time in these proportions vary by age.
Longer employment tenure has become somewhat more common among women age 40-54. For example, for women age 40-44 years, the proportion increased from 23.4 percent in 1983 to 28.5 percent in 2004.
To the extent that women's labor was priced cheaper than men's, it was not because women were "underpriced", but that for a combination of reasons the market (rationally) priced that labor as less valuable. Now, as women's work and career patterns are changing, so is the price of their labor.
So, while you're correct to say that Obama and Harkin are wrong to sponsor "pay equity" legislation, you make a real rhetorical mistake and give them just the sort of ammunition they need by calling women's pay "underpriced".
Ross Kaminsky earned a Political Science degree from Columbia University in 1987 and has been published in The New York Times, The Denver Post, The LA Times, and other major newspapers around the country. His blog can be found at http://blog.rossputin.com