Gender Pay Gap

Bernie Sanders praised Iceland’s attempt to close the gender pay gap in a tweet: “Iceland just became the first country in the world to make it illegal to pay men more than women. In the United States in 2016, black women made 62.5 cents on the dollar compared to white men and hispanic women made 54.4 cents. That is a disgrace.”

This excerpt was originally published in “Teaching Economics to Bernie Sanders.”

Women on average make less than men. Women earn roughly $.78 for every $1 men earn. One might think, surely this is the result of rampant sexism in the workplace and another example of patriarchal control in American society. Perhaps, such an inequality must be dealt with using coercive state force if a society wishes equality between men and women. In the period 1992-1994, 92% of workplace fatalities were male workers. This means that 92 men die in the workplace for every 8 women that die in the workplace. Where are all the progressives demanding gender equality for workplace fatalities? Just as there are flaws in assuming that the workplace fatality gap must be corrected, there are flaws in assuming that the so called “gender pay gap” must be corrected.

Contrary to Sanders, there are rational reasons why women earn less on average than men, just like there are rational reasons why men are more often the victims of workplace accidents. Men are more likely to take dangerous jobs involving heavy lifting, operating heavy machinery, working in dangerous places, etc. This accounts for men being the victims of workplace fatalities more often than women. Referencing an article by Mises University Alumna Brittany Hunter, “when the data is examined more closely what we find is not necessarily a wage gap, but what could more accurately be described as a ‘preference’ gap that exists because of personal choice rather than gender.” She goes on to explain how individual preference and choices affect their wages. For example, one might take a lower salary with great benefits while someone else prefers a higher salary with less benefits.

Hunter explains, “Instead of seeking a promotion, which often means more responsibility and more time spent in the office, many females with caretaking responsibilities have instead chosen to accept lower pay in exchange for the benefit of spending more time outside the office.” She touches on the idea of human action, that individuals act to achieve certain ends. In this case, men and women are seeking employment to achieve an income. These actions are dependent upon the preferences of the individual, so there is no reason to assume that men and women would make the same income on average. “The gender wage gap theory relies on a statistic that attempts to draw a very narrow conclusion from a very broad set of data. As individuals, we are each fueled by unique value systems which help us make thousands of decisions on a daily basis. To reduce each individual decision down to a person’s gender is not only insulting, it also completely neglects the importance of human action,” Hunter concludes.

Men and women of the same experience and skill level in the same occupation are in fact, paid equally on average.

Equal pay is guaranteed under the Equal Pay Act of 1963. It is individual preferences that may cause the income gap to form as men and women make career choices over time. A woman with ambition to be a CEO may seek promotion, sacrifice less personal time for more time at work, improve skills to become more valuable as an employee, etc. A woman who wants to have a family and spend less time at the office will naturally not seek promotion. If more men on average seek promotion than women, it makes sense that men would make more money on average than women.

The data that yields the gender pay gap ignores the value to a family that is not manifested in the form of income. Whether a man or woman stays home with their children, this action has value to a family. The benefit of not paying for day care or a maid, for example, isn’t represented by one’s income, nor is the benefit of being able to better raise children by having a parent stay home. If a given woman is more valuable to her family by staying home, then it is in the interest of her family for her to stay home rather than earn an income at a job. It is quite possible that a woman’s value to her family is greater at home than any amount of income she might produce from the job market. This value is not considered in the pay gap statistics.

Another issue with the myth of the gender pay gap is in the data itself. It does not discriminate between hours worked, occupation, skill level, education, etc. The pay gap statistics use the median annual earnings for full-time, year-round workers. Of course, there will be a pay gap between a worker who is averaging 40 hours per week and a worker who is averaging 80 hours per week, assuming they are paid the same hourly rate.

Proponents of so called “fair pay” would suggest that government action is needed to “close the pay gap”.

This means mandatory price controls on women in the labor market. I refer to chapter 1 where I explained the horrors of price controls on labor. One could imagine the effects of a policy. Imagine a policy mandates equal pay between men and women throughout their careers. Let’s say that a man seeking promotion throughout his career starts his career at $30,000 per year and finishes his career making $350,000 per year. This is unlikely, but certainly attainable by actively seeking promotion within a company and ending up in an executive position. Meanwhile, a woman may start her career at $30,000 per year and finish her career making only $50,000 per year. Perhaps this woman married early on in her career and preferred time at home rather than the workplace. This woman would not be interested in being promoted to CEO. She would be content with the lower paying, less-stressful job. Fair pay proponents would point to this as an example of inequality and demand the woman be paid equal to the man when it is just an example of an individual acting in accordance with her preferences.

One could imagine the absurdity of such a policy. Employers would have to impose “no family” policies on women employees (which would be illegal, of course) to guarantee women employees’ interest in climbing the ladder within the company so that equal pay may be guaranteed (unless the employers take a loss and pay people more than they are able to produce). Such an absurd policy is difficult to seriously analyze. Such a policy would ultimately call for even more invasive government control in the labor market than already exists. It is worth noting the Marxist tendencies of the current feminist movement. Calls for fair pay result in nothing more than massive government interference and thus destruction in the private sector, the sector that Marxists wish to dismantle. Just as the Marxists blame the “bourgeoisie” for the struggles of the “proletariat”, the feminists blame the “patriarchy” for the struggles of all women everywhere.

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