Equal pay is good economic policy

Jonathan Zhao’s editorial in the Duke Chronicle seems to have already spurred some discussion on the topic of equal pay for women; if you haven’t read it, I highly recommend you do so right now. Try to contain your incredulity at the title and some of the phrases (“the less productive gender”).

The truth about fair pay is that women face persistent unconscious discrimination in the workplace. But the current laws on the book are designed to combat instances when clear decisions were made to pay women less for the same work. The Lilly Ledbetter Act was passed because a woman who had been paid less than 15 other men for doing the same work had no recourse for recovering the wage difference.

Let’s look at Zhao’s thesis – that equal pay for women will actually lead to worse outcomes for women (let’s ignore the fact that he thinks an aspiration for equality is “anti-feminist”). He assumes there are large competitive advantages for both men and women. This isn’t true; if you think that “women make better teachers than men” you are probably exhibiting a conscious bias. But even if it is true, it is not reflected in the market – men make more than women in almost every sector (including, incidentally, teaching). It also seems extremely unlikely that men are more productive than women in general.

In theory, employers who consciously or unconsciously discriminate against women should have a competitive disadvantage and be pushed out of the market. Zhao points out that “equal pay laws serve only to remove the penalty for undue sexism in the labor market.” If bigoted firms are not pushed out of the market because they are longer bigoted then I’m not sure that’s such a bad outcome. However, this is irrelevant, because in practice it doesn’t happen. Evidence shows that corporate boards with women on them perform better, likely because they can choose the best candidate from the entire population instead of just males, but over a third of corporate boards in the United States still have no women on them. Passing over women in situations like these is a serious economic problem – if half the country has a lower chance of being hired or may be paid less we are wasting a huge amount of potential.

One of Zhao’s most inflammatory points is that women should be paid less because they cost more in benefits, through childbearing and other higher costs. Zhao’s arguments echo that of former Republican presidential candidate Mitt Romney, who was derided for his comments on women’s equality, which implied that what women really need in the workplace is more flexibility to go home and cook dinner for their families. Many times the reason women leave jobs in the United States is for child-rearing, not childbearing – a responsibility that is overwhelmingly performed by women, but doesn’t have to be. In the United States, women get 3 unpaid months off when having a child, ungenerous when compared to the rest of the world and a policy I believe even Zhao would support (though I wouldn’t put it past him to think that companies should be allowed to fire women for having children). What if men also had 3 months off to help raise their child? The cost of benefits and the share of domestic work in a household would be more equal and instead of women sidelining their careers to raise their children, men could take on the responsibility.

We don’t live in a world of perfectly rational decision making. Classical economic models only have so much application to the real world, and our unconscious biases tend to screw them up. Others on the Chronicle comment section have made light of the fact that Zhao is first-year undergraduate with little formal training in economics. That doesn’t mean that he can’t add meaningfully to a dialogue, but it does mean he should make extra sure to back up his theory with fact.

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