Vive la Difference

Thomas Sowell is something of a bugbear for a certain type of political activist. He’s a conservative (or as I would probably call him in my transatlantic manner, a classically liberal) economist who is also black. There really is a certain mindset that thinks that anyone with enhanced melanin must therefore be liberal in the more modern American sense. Sowell is a standing rebuke to such. Here he is on the subject of the gender pay gap:

We’ve frequently heard, and will hear much more I am sure if Hillary is the Democratic nominee, that women make 76 cents for every dollar a man makes. Can you give us a basic rundown of why that discrepancy exists?

There are lots of reasons. Men and women do not work the same number of hours. They do not work in the same occupations. They do not work continuously the same, and so on.

You know, if it was really true that you could hire a woman for three quarters of what you could hire a man with exactly the same qualifications, then employers would be crazy not to hire all women. It would be insane to hire men. Not only would it be insane, it would probably put them out of the business because the ones that were smart enough to hire women would have such a cost advantage that it would be really hard for the others to compete.

There are lots of gross differences between men and women and other groups and some of them shocked me when I first started doing the research. For example, I found that young male doctors make considerably more than young female doctors. But, when I dug into it a little deeper, I discovered that young male doctors work an average of 500 hours a year more than young female doctors. Obviously, a doctor that works 500 extra hours is going to make more money than the other doctor.

OK, now this isn’t exactly news to us here. We know that a large part (it’s not in fact whether it’s a large part of it explained this way, the argument is really about whether it’s only a large part of all of it) of the gender pay gap is explained by hte career interruptions that women (tend to) take in order to have and raise children. That plus the reasons above might in fact explain it all. But there’s been an interesting comment at another blog, Lattenomics, looking at the same piece.

In the comments one person says:

I think that is completely ridiculous. Women should get as much money starting out as a man does regardless whether or not she does or does not have children, or any other factor. The thing that should count is that she can do the exact same job as well as a man and that is what they should get paid based upon.

As our Lattenomicist points out,  the second sentence is of course correct. An individual who can do a job as well as anyone else is indeed both morally and in law due equal payment. But of course here we’re talking about averages and while many women are indeed paid exactly the same as the men with whom they work and or compete, some women do indeed work shorter hours, have indeed dropped out of the working world for a year or two to have a child and so on. So when the effects of their lower wages are taken into account it looks as if all women are discriminated against: which isn’t in fact the truth.

There’s also one more point that needs to be made. Let’s say that no women drop out of the job market before they are 30 in order to bear a child and that all men and women enter the job market at 22, equally qualified. We’ll even insist that all work the same hours and are all equally good at the work itself (yes, I know grossly unreal and unprepresentative of the outside world, but models are simplifications used to highlight a specific point).

We’ll also say that 80% of those women will, at some point between 30 and 40 years of age drop out of the workforce for a year each time to have a child (that percentage of women who have children is about right, the maternity leave part is more European than US).

What would we expect the effects on womens’ wages to be? Clearly, in the age group over 40 we would expect (if it is this dropping out that causes the pay gap) the wages of those 80% to be lower than the 20% of women who didn’t and of the men. But that’s not all, not by a long shot.

The wages paid to people in the 22 to 30 ages are not purely and solely for the work they do in those years. Some part of it is about the work they might do in the future: what will they develop into? And it’s this that will mean that womens’ wages will be lower than mens’ in this situation. For there is a 4 in 5 risk that the employer will lose some of those more productive years that he is paying for now. More, knowing that he faces this high risk (and add in the fact that many women in fact change to a lower hours job when they have young children) he’ll spend less on training that young woman in those years.

In short, the fact that women might tend to take a career break in the future will lead to their earning lower wages now.

Yes, we’ve all heard the line, there’s lies, damned lies and then statistics. The power of it as an observation about the world is that by picking and choosing the numbers you quote you can prove just about anything that you want: which is why when people present us with carefully chosen numbers we need to be so wary.

For example, in the US the gender pay gap is normally stated as women earning 79 cents (or whatever the number is) for every dollar earned by men. Now while it’s true, it’s not actually very informative. For, for example, do men and women work the same number of hours? No, they don’t, not on average, they tend to have shorter work weeks and in common with their sisters around the world they also tend to take more time off for illness.

No, of course that is not all of that 21 cent gap, but it is some of it, which is why that particular statistic isn’t really all that useful to us in deciding firstly, whether this is a problem we want to do something about and secondly, what we might do.

One such number that caught my eye this week was from an MEP (a Member of the Euuropen Parliament and thus one of those with power in Europe):

And how has it come to be that the UK has the largest gender pay gap in the European Union?

Now I expect politicians to be ill informed but that’s ludicrous. As the figures from her own organisation show, the UK’s gender pay gap is actually below average for the European countries, a very far cry from being the worst.

So what is happening? She’s quoting from these other figures, which do indeed seem to show the UK has the largest gender pay gap in Europe. How can we have both a below average and the largest gap in the same country at the same time?

The answer is in which actual figures are being looked at. The first figures are made up of only people who are working full time (the numbers accord very well with those you can work out by looking at average hourly pay).

The second set of figures come from looking at all of those in work. Which, as you might imagine, includes those who work part time.

And this is where the problem comes in. Those who work part time get paid less per hour than those who work full time. This is true in every country, it’s true of both men and women. Work part time and you’ll get less per hour than your full time contemporaries.

Add this together with the fact that we have a very different structure of employment in the UK than they do in other European countries and that’s where the difference comes from. For the UK has many more women working part time than the others. This is normally though of as something beneficial: those women who want to can find part time work which allows them to have and raise their children, rather than being forced into either full time work or none. But when you look at the average pay rates of men and women you’ll then be including both the effect of the gender pay gap and the part time pay gap.

Which is what allows a politician to say that a country which has a below average pay gap actually has the largest one.

See, you can prove anything with statistics.

No, this is really quite a clever idea: very much killing two birds with one stone type of clever thinking. So let us take two of our current societal problems.

The first is the Mommy Track and that way that it feeds through into the gender pay gap. We know from previous looks at this that when (if, but the problem applies in a less serious form to those who might in the future) women take a career break to have and possibly to raise children, it’s very difficult for them to get that career back afterwards. Part of it is simply less experience than those who didn’t take the break, part of it is the continuing desire for greater flexibility (and possibly shorter hours) that having children creates. There was most certainly also direct discrimination in earlier decades: how much of this remains appears nowadays to be more of a polticial question than an empirical one.

But as we know, it is this motherhood gap which is responsible (again in larger or smaller part to taste) for the difference in average wages between men and women. There’s also research showing that women who do take part time jobs, in order to have the flexibility they desire, don’t work at the same high-powered level they did before they took the break and had children: so there’s education and training, human capital in the jargon, going unused, something which makes us all poorer.

OK, that’s problem one. Problem two is that we can clearly see that regulation of financial markets and the banking system has been wanting. It’s not so much the external regulation which is wanting though: at least, not in my rather free market opinion. It’s the internal regulation, of the banks and finance houses themselves: it’s entirely obvious that all too many managements didn’t understand what it was that their own employees were doing.

So, Yves Smith at Naked Capitalism makes the suggestion that the banks create a Mommy Track all of their own. Not like the standard one, not at all. Rather, as a way to make the best use of those valuable skills, as a way to use all of that expensively trained human capital, while those mothers desire to have perhaps part time or at least not the brutal 70 hour banking work weeks.

Offer the mothers the chance to be the internal regulators while they are raising their small children. This keeps them in the marketplace, keeps their contacts and knowledge fresh, while allowing them to raise the next generation. It also provides a pool of experienced labor to do that oh so needed regulating: and as an added extra bonus it’ll, in banking at least, help to close the gender pay gap.

Women who’ve performed well in the City or the Street often find it impossible to work out part-time positions when they want to have children, except in those rare admin jobs that require substantive knowledge. You can get good women on the cheap with well-designed mommie track roles. Regulators should sit up and take notice.

An excellent and seriously good idea: not that this means anyone will take any notice, of course, even if they should.

This is a slightly out of date book, “Creating a Life, Professional Women and the Quest for Children” but it seems to have bounced back up again into the blogs recently.

Here’s Bryan Caplan on it, an older piece from Prospect about it and the Falkenblog. I tend to side with economic arguments rather than the feminist ones, but then I pretty much always do side with the economic arguments.

Essentially, I don’t think it’s any surprise at all that women who have great success in a career or professional life tend to have fewer (or no) children than those who have directed their attentions somewhat less to said careers. It seems blindingly obvious that one cannot do everything in this life and that concentration on one matter or another is going to mean that other opportunities slip one by. We do live in a society where to get to the top you have to work both very hard and very long hours: whether we’d like it to be this way or not is another matter, as is what we might do if we want to change it. But given that this is so I simply cannot summon up even any wonder, let alone surprise, at the idea that those who have taken one path have by doing so given up other options.

After all, we do know that this whole scenario is (one of) the causes of the gender pay gap. Those women who do have children tend to drop out of the workforce for a few years, often only coming back part time until the children are older. While there are those that complain, it’s not difficult to understand that this makes scaling the very peaks of a professional career somewhat difficult. I simply can’t raise that wonder at the idea that those who do scale those dizzy heights are the ones who have not so dropped out.

Two sides of the same coin really.

An interesting piece here concerning monopsony in labor markets. OK, let’s revise that “interesting” to carry a specific meaning: of interest to political and economic geeks like myself. But it does have wider implications.

The literal meaning of monopsony is “one buyer” (just as the literal meaning of monopoly is “one seller”). In the context of labor markets, monopsony means one buyer of labor, that is, one employer. But that’s confusing, because these days when economists use the term in the context of labor markets they usually don’t mean one employer.
Here’s what they do mean: in the standard labor market model, known as the perfect competition model, the market as a whole — that is, the supply of labor (all workers seeking a job) and the demand for labor (all jobs being offered by all firms) — determines the wage. The market-clearing wage occurs at that point where labor supply equals labor demand.

Moreover, in the perfect competition model, no single firm has the power to determine the wage; it simply accepts the wage that the market as a whole has determined, and that is what it offers to its workers. In this model, workers are extremely wage-sensitive, so much so that if any single firm cuts wages by even one cent, all the workers at that firm will immediately quit and find employment elsewhere.

In the monopsony model, however, the theory is that the employer has what is known as “market power,” and therefore is not a “wage-taker” (i.e., doesn’t have to offer the market wage). In this model, it is assumed that it’s the employer, not the market, which sets the wage. Therefore, in the monopsony case, the employer will offer below-market wages. And moreover, it’s assumed that the source of the firm’s market power are forces that bind an employee to an employer, so that if wages were cut, at least some of the employees would stay.

As is further explained, this has interesting implications for the gender pay gap. One of the reasons that the firm might have this pricing power is that it offers other, more intangible benefits: time off to care for children perhaps, or part time working, flexible working. And there are studies which show that women value these things more than men and thus that firms hold greater pricing power of the wages of their female workers than they do over men.

This can lead to people arguing (as is indeed done here) that the existence of such monopsonistic power means that greater intervention in the labor markets can be justified: both on equity and efficiency grounds. One example is as discussed here, that perhaps decent day or child care should be made a component of all jobs?

It’s an interesting argument, as far as it goes, but I’m not sure that it actually goes far enough. I don’t think there’s anybody who really believes the model of pure free markets in labor: nor do I think there’s anyone who would argue that there isn’t at least some monopsony power as described here. However, what we really want to know is which model is closer to the truth: models are, after all simplifications to aid us in understanding something complex. I tend to the free markets side, others might not.

But I’m really not certain that even that is the important point. It is, rather, that this allegation (description? accusation?) of monopsony power is I think missing the crucial distinction. From the point of view of the employer, these women friendly policies are not distinct from the wages of the labor being employed: they are very much part and parcel of them. Flexible working, child care, health care, part time jobs, all cost the employer money to provide. That if they spend more on such things then they will pay less in actual cash for the labor seems to me to be obvious. And that women who prefer these benefits to higher cash wages are in fact earning the same amount as the men who prefer the higher cash and fewer benefits. So while we have an apparent monopsony here, the firm with power over labor, I don’t think that we actually do. It’s simply that, in this example, we are assuming that men and women desire a different mixture of rewards for ther time and expertise, while the total reward is equal.

The error comes in from only considering the cash side of the compensation, rather than the total costs and benefits received.

What this then means for the political action is that insisting that the compensation be structured in a “woman friendly” manner is both unfair in equity terms and a bad idea in efficiency terms.

In equity, because the unmarried and or childless will be forced to accept part of their compensation in a form that they do not desire: those child friendly or child care policies, rather than the cash to spend as they wish they would prefer. Further, in efficiency, because it is efficient for both workers and employers to decide upon the mix of compensation offered and accepted.

As you might have gathered by now, I’m not entirely sold on this idea that we have either imperfectly operating labor markets and given that, I’m certainly not sold on the idea that we need to fix them.

Why monogamy? There have been plenty of societies (there still are some) which are polygynous (many wives for some men, none for others) and while there are indeed still places which are polyandrous (several husbands, one wife) they’ve been markedly more uncommon.

The first and most obvious explanation might be to do with lower violence and modern medicine. We can imagine societies in which men get killed in far greater numbers than women: highly warlike societies, for example. And there’s good evidence that hunter gatherer societies are indeed so highly violent (some research shows that being a male member of certain modern hunter gatherer tribes leads to a lifetime risk of death by murder of 30-40%….higher than inner city drug dealers face!) that there will be a shortage of men: thus polygamy.

It’s also possible to postulate that given the very high death rate of women in childbirth a possible shortage of women might arise, leading to polyandry. Although where it is seen it’s normally in the poorer echelons of a society that demands dowrys for daughters who marry.

But why is it that, barring a certain few small sects, modern societies are all monogamous: at least, serially monogamous in marriage (there’s always a certain amount of bed hopping going on, of course)?

The answer seems to be in the relative economic value or status of men and women. But no, not men being of high status, women of low, but of the variations in status amongst men and amongst women.

The paper is here and an explanation from Marginal Revolution.

Economic growth means that some women have higher human capital than others and thus they are better suited at producing and rearing high quality children. Wealthy men with lots of human capital will start to bid for these women and they will have to offer them exclusive status; these men also wish to invest in a smaller number of higher quality children.

In other words, male inequality encourages polygamy while female inequality discourages it. Apparently female inequality has been winning that race.

While I’m sure this is correct it rather amuses me in a way. Because higher human capital is another way of describing, in our modern economy, more tertiary or post-secondary education. And we’ve been rather bombarded with stories about how with women now getting a majority of the degrees, how some of them are going to have to marry down, to less educated men, in order to find that desired husband.

That doesn’t invalidate the finding of course: marrying someone with a lower educational attainment than oneself is still consistent with marrying the one with the highest human capital that is actually available. The best of the available pool would still make the mechanism work, that men have to offer exclusivity to gain the women with the highest human capital.

(For those wondering how the mechanism works, it’s like this. Men can have many children, far more than women can, by having many wives. The number of husbands does not determine how many children a women can have: that uterus gets used, along with the associated feeding bits, for some two years per child. The male physical investment is a few minutes: well, more amongst the proficient. Thus the desire for the woman is to be the only (and we are talking purely in biological terms here, not emotional or moral) one whose children the economic resources of the male is being spent upon: for the male, having a greater number of children might outdo the effects of the concentration of his resources. Thus the pressure that the more desirable women are able to bring to bear to enforce exclusivity.)

So even now women are gaining higher human capital than men, that male fantasy of the harem seems to be ever further out of reach.

Unless, of course, one looks to the lower echelons of the society, where children do rather to be sprayed around with rather more abandon.

Well, yes, I think we already knew that, didn’t we? Women are indeed more discriminating in their choices of bed partner than men are…..sorry, that’s not the point here?

Ahem, sorry. Sir Alan Sugar is a British businessman and there’s two things you might like to know about him. He hosts The Apprentice, the UK version of the TV show that Donald Trump runs in the US. The other is that back in the day, at the dawn of the PC computer age, he was one of the very few people ever to have out negotiated Bill Gates.

However, these two sterling qualities don’t mean that he’s always correct: but you should make up your own mind about this statement of his:

Women bosses are more likely than men to discriminate against female employees with children, Sir Alan Sugar has told The Times.

Sir Alan, executive chairman of Amstrad and Viglen, discussing the issue of working women and the provision of childcare, said: “Be under no illusion. There are women employers who are more ruthless than men. They are more conscious of not employing other women because they feel they’re not going to get the value of work out of them.”

It’s an interesting point but one that without actually doing the empirical research we cannot know the truth of. However, this thouches on something we have mentioned before.

He thought it right that women were asked about their plans to have children and how they expected to look after their children while at work. “I think it’s right for women to volunteer the information,” Sir Alan said. “Companies have no divine duty to help with childcare. Companies employ people. It’s the Government’s responsibility to provide childcare. You pay a person a salary and they cut their cloth accordingly.”

That is, maternal profiling.

Sir Alan, who fronts The Apprentice, which starts a new series on BBC One tonight, has been criticised for arguing that equality laws make it more difficult for women to find jobs.

Indeed, it’s an obvious and logical outcome of those equality laws, that they make women who do have children more expensive to employ and thus they are either paid less or find it more difficult to get a job.

There’s nothing very surprising about this, it’s a natural part of the way the world works: the only thing we can possibly be surprised about is the number of people who seem not to understand it.

This is an exceedingly interesting essay, a book review of a chapter of “Discrimination Against Caregivers?” by Erin Kelly. It breaks out the various pieces and parts about differing gender roles that lead to the gender pay gap and comes tohte same answer that I think most of us are now. That said pay gap is not about direct (or taste) discrimination, but about the way in which men and women choose to do different things with their lives.

But it’s also interesting in the way that the different influences are given a different weight than they might be by a less, say, feminist author. For example:

II. Theories Explaining the Economic Consequences of Caregiving

1. Human Capital Theory

This puts the responsibility of the consequences on the women: differential investment in occupational attainment results in differential economic returns. Women are more likely to leave the workforce; work fewer hours, invest less in education and training; expend less effort when working; and choose occupations or jobs that have lower penalties for working less and greater possibilities for part-time work, jobs that tend to be lower-paid. I am not persuaded by these theories, and Kelly cites a number of studies that refute the proposed explanations for economic differentiation.

Until that last sentence I would agree absolutely. A simple look at the world around us would show that these things do indeed happen. As this piece in The New Statesman says (a left leaning UK magazine):

It is important to be clear what the problem is. Is it bad news that women want to spend time with their children? Surely not, given the evidence for the importance of parental engagement in the early years of a child’s life. Are these women “forced” into part-time work, and now just grinning and bearing it? No - the overwhelming majority say they positively chose part-time work, and their job satisfaction is higher than that of mothers working full-time. Most men and women, according to the British Social Attitudes Survey, think that a conventional division of labour is the right one, with mothers taking on the bulk of responsibility for childcare.

Quite how one can be “unpersuaded”by such theories when they are clearly and obviously true as an explanation of at least part of the pay gap is beyond me.

Where I really disagree though is in th ideas for solving this “problem”. For the author seems to have missed something very important here.

Still, changing anti-discrimination law to address the economic marginalization of caregivers would achieve the following:

1. Recognize the marginalization of caregivers as inefficient and a legal liability

2. Re-evaluate the meaning of work and how work is rewarded

3. Ensure that caregivers are not economically penalized for taking advantage of family-friendly policies

4. Create enforcement mechanisms for ensuring meaningful compliance with the new redefined anti-discrimination law in the form of sanctions.

We’ve seen what happens when such anti-discrimination laws are put into place. For example, many European businesses will simply not hire young women presumed to be fertile, or likely to have a child. The costs of employing someone who does then take the extensive maternity leave on offer simply makes them too expensive. If we add to the possible expense of hiring women, by stating that caregivers should be given extra (and expensive) rights, then we’re simply paving the way for businesses to employ fewer of them, or for offering lower wages to those that they do hire.

Quite how this is going to narrow the gender (or caregivers’) pay gap I can’t really see.

I thought this was an excellent little article.

We’ve seen plenty of wives in this position in recent years. But it’s hard to imagine that political husbands are haunted by the nightmare that it might happen to them.

Perhaps that’s because they know their wives have lower expectations of spousal adoration than their male peers, or because unfaithful women tend to have affairs with equal or higher-status men, who have an equal or higher stake in discretion.

If a female political leader did get caught in a sex scandal, having her husband stand silently by the podium while she sought forgiveness would probably make matters worse. Many Americans would conclude that she was a castrating witch married to a wimp.

We do indeed seem to have something of a double standard here. I’ll also admit that I really don’t know why Eliot Spitzer’s wife didn’t simply slam the door of the family home on him and tell him to get lost. But, well, not my life to run, is it?

It’s also true that infidelity itself is thought of rather differently these days. It’s not all that long ago (yesterday in some countries, and tomorrow as well) that infidelity by men was almost normal. infidelity by married women being regarded as something much more serious (although sex in an age without effective contraception explains at least some of this).

This though is the meat of the piece for me:

This double standard can be seen in business as well as politics. Outright discrimination on the basis of gender has been all but eliminated in the workplace. But women still face discrimination on the basis of family status. Today, unmarried and childless women earn just about as much as men, and in several American cities women in their 20s earn more, on average, than their male peers.

Yet, once spouses and children enter the picture, the gap between men and women again widens. Married men have an earnings advantage over unmarried men. Married women, however, have no such advantage over their single counterparts, and women with children face substantial penalties.

In 2005, Cornell researchers Shelley Correll and Stephen Bernard created 600 fictitious resumes for midlevel marketing positions. Half mentioned relocating with their families and indicated participation in a school board; the other half simply mentioned relocating, with no reference to family. Women who did not mention family ties were almost twice as likely to be deemed hirable.

And when applicants with discernible family ties were selected, men with children were offered a salary of, on average, $6,000 more than childless men, while women with children were offered $11,000 less than the childless women.

I’ve long been proposing the contentionthat we don’t in fact have a gender pay gap. We have a child care pay gap, one which for a number of reasons (you can argue for societal expectations or for biological determinisim, doesn’t affect my main point) is carried almost exclusively by women.

Now, whether we want to do something about it or not is one matter: but only if we correctly identify the problem, accurately divine the causes, will we in fact be able to do so.

If we should so wish, that is.

This is really rather surprising, a left wing organisation like the Trades Union Congress, being reported in a left wing newspaper, The Guardian, actually makes a sensible statement about the gender pay gap.

The difference between men’s and women’s pay more than trebles when women reach their 30s, TUC research revealed today. It found women leaving school at 16 and going into a full-time job earn 9.7% more than their male contemporaries. But from the age of 18 - and throughout the rest of their working lives - they earn less than men.

In their 20s, the pay gap for full-timers is a modest 3.3%, but in their 30s women take home 11.2% less than the men. And in their 40s - the peak age for discrimination - the gap rises to 22.8%. The TUC said the undervaluing of women in the workplace was partly due to a “motherhood penalty”.

All of that is true, my only quibble with it would be that they say “partly” due to a motherhood penalty while I would say mostly if not completely. However, they then go and spoil their copybook by saying this:

The hourly earnings of women working part-time were 23.4% less than the male rate in their 20s, 41.2% in their 40s.

As we saw here recently, this simply isn’t true.

But I think I should reserve my greatest scorn for this particular piece of nonsense.

The long hours and intensity of senior positions deterred mothers from seeking promotions for which they were qualified.

If you’re not prepared to do the hours required, nor deal with the intensity, then you’re not in fact qualifed to do a job that requires either or both of those things, are you? But there is merit in the piece as a whole: it’s another brick in our wall of evidence showing that there really isn’t a gender pay gap, there’s a motherhood pay gap.

Quite what we might do about it is another matter, but only if we identify the causes properly will we ever be able to resolve the situation: indeed, only if we identify the problem properly will we be able to decide whether we want to or not.