Friday, May 25, 2012

The Rain in Spain

Maryland is wrestling with efforts to pass The Paycheck Fairness Act (here's a version put before the US Senate in 2009), a bit of follow-up legislation to the Equal Pay Act of 1963. It's what you'd expect: legislation intended to eliminate pay differences between men and women.

The economics of this are unambiguous. If you increase the relative price of female labor, you should expect to see fewer women being hired. The ones that do get hired will probably be overqualified for their positions. Maybe that's an adequate tradeoff, maybe not. I imagine that if it was, there would be no need for legislation.

To to euvoluntarity of things then. A contract to work is, at the risk of sounding like a simpleton, a contract. Two parties agree to an exchange of value. That tricky word "value" is a foil for a rather impressive array of elements. The clearest of these elements are salaries and productivity and this is what distresses folks who look at uncontrolled (or only weakly controlled) statistics. Less visible elements in the boodle o' value might be an implicit exit option, flex hours, work environment, lunch taxes or compromises on career ambition. These aren't captured in the terms of the written labor contract; they're part of the initial, invisible decision calculus made by both the employer and the employee. So I wonder on what basis this decision is not euvoluntary.

I point to the argument I made yesterday: in the minds of most people, employers (especially large employers) enjoy a BATNA disparity. If, in your capacity as a job seeker, fail to make the cut, it's no big deal for Westinghouse, since you're just another resume in a huge stack on HR's desk. For you however, you've trained as an electrical engineer for the last six years, and there are basically two firms, Westinghouse and GE that hire people with your particular skill set. Your alternatives are to lower your price point or to take an inferior job.

Which, like I said, will happen if this bill is passed. Sure, some women will transfer some of the hidden value from their boodle and turn it into salary (though I have a strong suspicion that many already do so), but some will simply take a rung or two down the ladder and live with it. The glass ceiling will drop even further.

Anyhoo, discussion point time:

  • Why isn't the public more aggressive about holding politicians' feet to the fire when they present a big ball of benefits without so much as peeking at the costs?
  • Because of the BATNA disparity problem, is transaction made between any corporation and any private individual ever euvoluntary? 
  • Why aren't sensible economists making arguments grounded in both folk morality and sound economic analysis? There's pretty clearly fairness and care heuristics at work here. That's all we've got to say; policies like this cause untold damage to women entering the workforce: they won't be able to get the jobs they want and they'll have wasted years on degrees that will turn out to be worthless to them in the workforce. 
Demand curves still slope down, contrary to the desperate wishes of elite interests.

1 comment:

  1. I live in Maryland and was unaware of this law, so it's possible some portion of the public is equally unaware (or I'm alone in getting my news from blogs).
    Separately, is it possible that much of the public believes either they or their spouse (for men) will be one of the women who benefits from this proposal? In that case the public might not be concerned with the costs until after many recognize they did not receive the benefit.


Do you have suggestions on where we could find more examples of this phenomenon?