What You Need to Know about Equal Pay

Earlier today while surrounded by women President Obama again demonstrated his fondness for governing by dictate and signed two executive orders designed to force federal contractors to pay women as much as men for equal work.One prohibits government contractors from punish workers who talk about their wages. The second ordered contractors to compensation data based on sex and race to the federal government.

The move is obviously designed to shore up his electoral base among women voters. President Obama's rhetorical justification for added more labor market regulations is that full-time working women still earn 77 cents to every dollar earned by men. This statistic is not as egregious as the old "59-cent statistic," but it is merely a more contemporary variation of the same theme: there is obviously rampant discrimination on the basis of sex in the work place.

The reality is somewhat different, as I was able to write about many moons ago. It turns out that family ties are the primary explanation for men and women taking different jobs that pay different wages. Marriage and child rearing result in many women making choices that put them on a lower earning trajectory. Women have higher turnover rates and fewer continuous years on the job than men do. More women work part-time jobs than men and have a higher rate of absence than men. Women also tend to seek out occupations where an absence to raise a child will not make them obsolete.

What I said then still stands today:

[T]he performance of women's earnings over time is not the result of systematic discrimination. Whether egalitarians like it or not, for the "average" woman her family life trumps other concerns on the margin. Employers and employees are merely recognizing this fact of nature: women and men are not equal in the sense of being identical. They are different and have different comparative advantages when it comes to work outside the home versus child rearing.

Of course, both men and women would like to work for much more than what they are getting paid, other things equal. But then, the other things are never equal. That fact serves as a useful devise for egalitarian politicians and bureaucrats. Social engineers use the persistence of inequality of income as the warrant for never-ending regulation.

By the way, if it is really true that businesses easily discriminate by paying women twenty-three cents an hour less than men, would it not be in their interest to hire only women? That they do not do so seems to indicate that any compensation gap is not due to irrational discrimination.