Left-libertarianism, Current Events

Some Thoughts on Equal Pay Day

Yesterday was Equal Pay Day and my Facebook reposting of my Learn Liberty video on the gender wage gap generated a whole bunch of discussion both on the thread and privately.  The assertion that the gap is mostly not the product of discrimination always generates much heat.  I thought I might take an opportunity here to say a few things about this issue and how it gets talked about among libertarians and their interlocutors.

One point of confusion is not understanding that the issue, for economists, is about discrimination in labor markets and wages.  When we say that wage differentials between men and women are mostly not due to discrimination, what we are saying is the following:  men and women with identical labor market characteristics and preferences about jobs will get paid nearly the same.  Our concern is whether wages are related to those variables rather than the employer’s like or dislike of one group or another, regardless of their job characteristics etc..  Put differently, economists tentatively conjecture that discrimination exists if any part of the pay differential between men and women cannot be explained by human capital and job preferences.

Notice that this says nothing about whether there is sexism elsewhere in the economy.  All that is says is that we only presume that employers are discriminating when they don’t pay people the same who have otherwise the same job market characteristics (aside from gender).

Those who argue, as I do, that most of the gender wage gap is not due to discrimination are often accused of just making a “libertarian” point, as if we think the market magically makes discrimination disappear.  In truth, the claim that most of the gap is not due to discrimination is widely accepted in the economics literature in general, libertarians or not.  The general consensus is that once the other economic factors are accounted for, only about 5 cents on a dollar remains unexplained.  In other words, of the gap of 23 cents (77%), about 75% is explained by those factors.  This is not libertarian priors.  This is the consensus of the literature.  Even a recent studey by the American Association of University Women (hardly libertarians) of 2008 college grads one year out found that there was a raw pay gap of 18 cents, but that only one-third of that was not explained by the usual factors.  In other words, the gap conjectured to be due to discrimination was 6 cents.  Arguing that discrimination explains only a fraction of the gender pay gap is a well-established result in economics.

If I had it to do over again, I would have softened the language in that video, which is phrased too much as “it’s not discrimination.”  The more accurate statement is that it’s “mostly” not discrimination.  Of course even the finding of an unexplained portion of the gap is subject to refutation and much of the literature on this topic involves economists trying to make sure they’ve accounted for all the human capital factors to see if they can explain more of the gap.  The debate continues.

As I noted earlier, even if there were no unexplained part of the gap, and that economists found no discrimination in labor markets, it doesn’t mean there isn’t sexism elsewhere.  For example, even if markets paid everyone exactly according to their human capital and job preferences, that human capital and those preferences could well be the result of sexism elsewhere in society.  Suppose we had a law that prohibited women from attending college.  It’s at least possible that gender wage gap studies would find no discrimination because women’s lower pay would be the result of their lower human capital.  All that would show is that employers don’t discriminate, but it would hardly be cause for celebrating the end of sexism.  The point people like me are making about the gender wage gap is that most of it is not the fault of sexist employers and that markets generally do pay people in accord with their skills and preferences.  That’s all we’re saying.

For libertarians, that seems to be an important result, especially if those arguing the other side think they can improve matters with public policy.  Trying to eliminate the pay gap through wage setting like comparable worth or anti-discrimination laws is not going to help and may well backfire to the extent such policies raise the cost of hiring women.  Instead, libertarians might want to join their feminist friends in working on the cultural side of the issue.  Some of the best things we could do to equalize men and women’s pay involve making sure that we aren’t discouraging girls from entering majors and acquiring skills that lead to better paying jobs.  Telling little girls that math isn’t for them, for example, contributes to pay differentials by affecting human capital.  Similarly, we could do more to encourage boys to enter the supposed “feminine” occupations.  We, and by “we” here I mean men, could do more to shoulder the responsibility of household production.  To the extent that it remains mostly women who interrupt their careers to care for children, or who are responsible for more of the “second shift,” it will remain the case that their wages are lower.  We can also use social pressure to encourage firms to offer more flexible employment arrangements that make this possible.  All of these are ways to work outside the state to reduce the role of sexism in determining wages even if we think labor markets are not a source of discrimination.

Finally, as libertarians we might want to challenge some of our feminist friends with the following consideration:  if patriarchy is real and men have disproportionate power over all of society’s major institutions, why should a feminist trust the government to be the solution to problems like the gender wage gap?  Even without assuming patriarchy, given the track record of government in the 20th century and before, why should we believe it will not only care about women’s interests but be able to effectively pursue them?   To simultaneously complain about how Congress is controlled by men and still think that the federal government is the solution to men’s oppression of women seems… problematic.  And if our feminist friends agree that the state is not the solution, then it would seem we’re all on the same side.

So arguing that labor market discrimination plays a very small role in explaining the gender pay gap does not mean that sexism has nothing to do with it.  Sexism matters, but far more in the ways human capital is acquired and preferences are formed than in the wage decisions made by employers.

  • CbyN

    “To simultaneously complain about how Congress is controlled by men and
    still think that the federal government is the solution to men’s
    oppression of women seems… problematic. ”

    To which they would argue that this is cause for electing more women so that they can remove said patriarchy from the government.

    • Steven Horwitz

      Yup, and then it’s time to deploy the public choice and knowledge problem arguments.

      • Spitting Truth

        A woman is more likely to be sensitive to female concerns regardless of what you think of Arrow’s Impossibility Theorem

  • Jerome Bigge

    When making studies of this sort, it is necessary to determine all the factors that go into “why” employers pay people what they do. Some people are better workers than others for one thing. Some are more dedicated to the job while others are “time servers”. Productivity also has an effect upon what you are paid. All of these factors go into determining what you will get paid. I’m speaking here as a former employer.

  • jtf

    So, basically, we have to work rid of this form of sexism: http://xkcd.com/385/

  • mgwmgw

    It would be nice if we could say that the pay difference was not due to sexism. Unfortunately, the evidence supports that it IS due to sexism. http://news.yale.edu/2012/09/24/scientists-not-immune-gender-bias-yale-study-shows

    • walter clark

      If it is admitted that some percentage of pay difference is due to bias and further that society as a whole feels this is a correctable problem there’s two solutions to choose from: let “society as a whole” work that change into the fabric of behavior through the efforts of attitude changers (civil rights movements for example). Or… use the coercive power of a central authority to go after the observable sources of bias. The problem with the latter is that there’s an infinite number of ways men can be biased against women that still satisfy the central authority’s enforcers. They can be rude, they can give difficult assignments, etc. This continued prejudice thus gives women more reason to distrust men and men justification for their prejudice. You can’t legislate attitudes. When you do see change after coercive agencies are created, it is because the change was already happening through non-coercive means. The coercive-agency and the politicians who funded them will of course, claim they were the cause.

  • good_in_theory

    “men and women with identical labor market characteristics and preferences about jobs will get paid nearly the same”

    If the evaluation of labor market characteristics and preferences is deformed by sexism, then showing that people with identical labor market characteristics and preferences are paid nearly the same does not, in fact, demonstrate that there is no sexism in hiring. Rather, one is question begging by assuming that the pricing of the relevant characteristics and preferences is correct, and therefore any disparate impact on the basis of differences in characteristics and preferences is a result of strictly economic concerns rather than sexism.

  • Al Bundy

    Very good post. Too often the discussion on this issue gets polarized to “it’s the evil patriarchy!” versus “everything’s fine, shut up.” If I could stomach being called a sexist pig by one side and beta male by the other for even trying to bring up the points made here, I’d do it more.. Now I can just link to this.

  • Jameson Graber

    “Some of the best things we could do to equalize men and women’s pay involve making sure that we aren’t discouraging girls from entering majors and acquiring skills that lead to better paying jobs.”

    My question in response to such statements is always, who is this “we” you speak of? And I’m not making an abstract libertarian claim about how collectives don’t really exist. No, honestly, I want to know who gets the blame. Who discourages girls to go into high paying fields? I don’t have data on this, and as far as I’ve seen, no one does. So we’re left with soft platitudes like “we need to encourage girls” to go into STEM fields and so on. Considering every job or grant application in STEM comes with a notice that “women and minorities strongly encouraged to apply,” I would say the problem must begin long before college.

    Given my lack of data, allow me to speak anecdotally. I was always good at math. Now, this may shock some of you, but this did *not* increase my popularity in public school. I never heard anyone put down anyone else’s lack of math ability. On the contrary, being good at math was seen as bizarre. (In the slightly racist town in WV where I went to junior high and high school, it was apparently something only “Asians” were good at.) So I’ve never seen a gender hierarchy reinforced when it comes to math. My sense is that being good at math is just generally seen as a hopeless endeavor, and only the highly self-motivated make it out of public school with strongly mathematical abilities.

    I’ve seen some studies done by the American Mathematical Society suggesting that girls respond more than boys to the mathematical failings of their teachers. Considering our elementary school teachers are largely afraid of math, they tend to communicate their fear to their students. If girls are more sensitive to that fear (whether because their teachers are women or not), this may explain a part of the problem.

    In any case, people like to talk a big game when it comes to this issue, but the truth is, no one really has answers beyond what we’re already doing: trying to improve education, continuing to combat stereotypes, celebrating equality, etc. These things don’t always work. They can’t always work. Personally, I’m not holding my breath until all subcategories of human beings magically appear statistically identical. Life just isn’t fair like that.

    • MARK_D_FRIEDMAN

      I agree with everything you say here, except “celebrating equality.” I prefer to celebrate excellence. Believe me, the world would be a far worse place if everyone else had math and science skills exactly equal to my own. I am immensely thankful that certain folks have talents in these areas that are FAR superior to my own. Now, had you said “equality of opportunity,” I would agree with you.

    • Les Kyle Nearhood

      Very good post. My own history as a public school teacher showed me that a small subset of boys were very interested in math and science, and a much smaller subset of girls were similarly motivated. Don’t know the reasons but it was a very consistent observation.

    • Fiona C

      This ‘we’ people often speak of is the very abstract: members of society. I think it’s different for this generation to some degree, but when I was growing up, I heard things like math/science is a boy’s subject, girls can’t do math, etc. I was the only girl on my school’s math team and teased for it. It discouraged me though not enough for me to stop pursuing my interests. But usually girls are more sensitive to criticism (due to upbringing? biology? both?) so I can see why it’s important to discourage this sort of attitude. I grew up in the southern US, so it’s possible these experiences were due to my location.

  • MARK_D_FRIEDMAN

    Prof. Horwitz:
    Excellent post and video. My question: has the research on this subject falsified the hypothesis that the small differences in gender compensation that remain and

  • Spitting Truth

    The labor market did not pop out of thin air, and it certainly didn’t arise from some Lockean state of nature. There is no reason to assume that the things the labor market requires of works are just, and there are in fact very convincing reasons to think that the state should intervene on behalf of women. For most of American history women were denied access to most good jobs and educational opportunities, and many modern jobs are clearly designed for someone with male biological characteristics. Taking time off to be pregnant shouldn’t end your legal career or stop you from making partner at a BigLaw firm, but it will because BigLaw grew up with male workers in mind. Most male dominated professions are arranged in the same way, and in that sense they actively discourage women from following those paths.

    Is that fair? A libertarian might think so given that women could make the choice to live like men in pursuit of economic success. The problem with that argument is that it assumes that the labor market is constructed the way it is due to things that even libertarians would recognize as injustices, which means that letting things stand as they are is unjust per se. So even if the market treats men and women neutrally in a superficial away, there is an underlying injustice that the state should work to correct.

    • Les Kyle Nearhood

      Actually labor markets are an example of spontaneous order, so I do in fact believe they popped out of thin air.

      • Spitting Truth

        Labor markets in the United States did not emerge spontaneously, they are supported by various laws and state actions. If you seriously think the modern labor market simply popped into existence you are an idiot.

        • zjohn

          “Labor markets in the United States did not emerge spontaneously, they are supported by various laws and state actions. ”

          State invention needed to correct state intervention?

          • Spitting Truth

            That’s the gist of the argument I made above. Suppose we accept many “libertarian” ideas about the use of state power. The existing distribution of property and labor market exist at least in part because of “unjust” things that the government did. Refusing to help women and telling them to deal with the labor market as it is current constituted is therefore itself an injustice since employers and society in general have no right to ignore what was done to women in the past.

            A similar argument smashes libertarian views on property rights, which is something that Nozick himself seemed to understand very well. Saying that we are morally obligated to respect the existing distribution of property would only make sense if we thought that people with capital had acquired it through just means, but in the real world we know that developed countries do not work that way. America was stolen from Native Americans. Modern corporations practice crony capitalism now. In what sense do those with capital have a right to it? You have to adopt an ahistorical posture for that sort of argument to work. That’s why I find the NAP so transparently absurd. You are basically saying that people can never use force to rectify past injustice and that they have to accept some people get to be rich due to ill gotten gains just Cuz That’s The Way It Is. Needless to say, that is not a convincing argument.

          • Les Kyle Nearhood

            Funny, but I am not convinced that any group knows how to rectify those past injustices, or that any attempt to do so would itself be just.

          • Spitting Truth

            So you are saying we just have to accept things the way they are now? Would you say that if we had just come out of a feudalistic period and a small group of landed elites controlled almost all wealth? Yes or no? Would the serfs have to suck it up? In my opinion if a society is rich enough to provide everyone with a reasonable quality of life wealth distribution is the best way to solve this problem. If we cannot get back to the “just” distribution of property we may not allow any man or woman to be destitute if we have enough wealth to go around because they have a claim on society’s property that cannot be ignored by libertarians.

            In terms of politics and how to handle this debate it seems to me that we should allow democracy to work this out for us. While I largely accept the criticisms that are levied against democracy by social choice theory, it is true that in democracies the political class actually does care about what people want. That is why they are so obsessed with polls. And if people really hate a party it usually gets voted out of power.

          • MARK_D_FRIEDMAN

            You say: “If we cannot get back to the “just” distribution of property we may not allow any man or woman to be destitute if we have enough wealth to go around because they have a claim on society’s property that cannot be ignored by libertarians.” Actually, if you inserted “innocent” in front of “man or woman,” almost all libertarians would agree with you. So you are pretty much tilting at straw. As for those who are destitute through their own irresponsibility, maybe you and those who share your views can bail them out with your own resources. What do you say?

            With respect to your second paragraph, I much prefer to search for correct principles of justice to serve as the foundations of society, rather than “majority rule,” which quite obviously can produce manifestly unjust outcomes. Ask blacks who survived the Jim Crow South or Japanese-American citizens imprisoned during WWII, or do you think all of that was just peachy-keen?

          • Spitting Truth

            Speaking in terms of my resources vs your resources is to assume your conclusion. You have to prove that they are in fact “rightfully” your resources in order to put things into those terms. I simply reject that out of hand because you haven’t given me a reason to think I should accept your view of property rights.

            Majority rule is the most stable and effective method for meditating disputes in society even if it doesn’t lead us to the “”correct” answers. Republicanism with checks on the tyranny of the majority is probably the best system of government we can come up with, and given that anarchism is literally retarded in a world where powerful states like China won’t become anarchist that means it wins by default.

          • MARK_D_FRIEDMAN

            No, I don’t have to “prove” anything. All I need do is offer an account of justice (including an account of rights), that is superior to the alternatives. I attempt to do so in my Nozick’s Libertarian Project: An Elaboration and Defense (Continuum, 2011), which as you can tell draws heavily on Nozick’s work. What is you competing account of political morality?

            The second paragraph simply confuses politics with philosophy. Why is republicanism the “best” system? Best in what way? How can you know what’s best without first articulating your standard of justice and morality? So, again, what is your alternative to libertarianism? If a system is “stable” and “effective” in maintaining unjust laws and institutions, I would say it sucks. How about you?

          • Spitting Truth

            It depends on what you mean by superior I suppose. I haven’t read your book so I can’t comment on your substantive theories.

            I’m a consequentialist who favors liberal democracy because of the practical benefits. I honestly don’t think any sort of non-consequantalist system really captures the way people feel about justice, and certainly not the way I feel about justice.

          • MARK_D_FRIEDMAN

            I hate to burst your bubble, but “consequentialism” is not a moral theory, or a theory about “justice.” Without specifying in some detail the consequences that are supposed to count as “good,” to serve as the criteria for right action, all you have is the “form” of a moral theory. It’s like saying that you like “poetry.” Ok, well, who are your favorite poets? What constitutes a good poem versus a bad one? And there have been one hell of a lot of really bad poems written. I can be a “consequentialist” too: I count as the good only those actions or rules that protect highly stringent libertarian rights.

          • Spitting Truth

            I know that, but it is a broad description of a set of ethical views. I suppose you could call me a preference utilitarian if you wanted to get more technical.

          • MARK_D_FRIEDMAN

            Well, then, I strongly recommend Richard Epstein’s Simple Rules for a Complex World, which convincingly argues that strong property rights and other libertarian prescriptions would satisfy people’s preferences to a greater extent than any other political system.

          • jm313

            Redistributing wealth as we do it in America is injust and unfair because the wealth is not being distributed fairly since there are lazy, unemployed adults who have barely worked that are getting money they did not earn so they are basically getting a free-ride and on top of it the government is rewarding there poor behavior. All this positive liberty is BS! The problem with liberals is that they basically want to do whatever they want AND they don’t want to take any responsibility for it and they want someone ELSE to pay for their mistakes and their choices through the welfare state.

            The best and most fair way to have a more “just” distribution of wealth is to get rid of the welfare state and bring back labor unions which will increase wages causing a more “just” distribution. The people who work will be rewarded and the people who don’t work will suffer the consequences of there actions.

          • good_in_theory

            or state intervention needed to constitute markets.

        • Les Kyle Nearhood

          That is very silly. There existed markets in the unclaimed territories among trappers and natives before there was any law. Markets evolve and government comes along after the fact, sometimes adding something constructive but more likely simply favoring one group over another.

          • Spitting Truth

            The modern labor market is not analogous to the markets that existed among Native American tribes. Those tribes had governments of their own so your point makes no sense anyway, but we can set that aside.

  • Steve, nice post, but will the market overcome customer and co-worker discrimination?

  • martinbrock

    There is sexism elsewhere in the economy and elsewhere in life generally, and much of it benefits women at the expense of men, but hardly anyone cares, and I don’t expect this fact to change. The good guys will always feel a need to protect women from the bad guys, and women will always seek this protection, because humanity generally is born with this instinct. Rational economics has nothing to do with it.

    In the 21st century, women as a class are vastly better off than men as a class in my neck of the woods, but repeating this point is utterly futile, because the gut feeling influences the economic statistics and the politics more than any dispassionate science. If you have sons and daughters, you know it’s true, and you don’t much care either.

  • anarchist

    Prejudice and divide among the people is created by one and only one thing: politics. Abolish politics, and soon all the “isms” will disappear. The market will economically force integration.

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