John C. Goodman

During the Republican Convention, Democrats took every available moment of air time to count the women's vote. "Republicans are anti-women," they chanted.

And they frequently brought up this oft-repeated nugget: For doing essentially the same jobs, men get paid more than women. That claim is often combined with the complaint that whites get paid more than blacks and non-Hispanics get paid more than Hispanics. But are these assertions true?

Let's take the Labor Department finding that women make 77% of what men make. To hear the backers of the Paycheck Fairness Act (PFA) tell it, this is prima facie evidence of rampant discrimination. The PFA, which died in the Senate this summer, would have piled a new set of regulations on top of a slew of previous acts outlawing discrimination. Mika Brzezinski on Morning Joe was appalled when the PFA failed to pass. "I think all you have to do is pay women as much as their male counterparts and you're fine...why would someone have a problem with this?" she said. No one on the show that morning could give her an answer.

But there is an answer, and it's a good one. The reason economists have trouble with the idea of rampant pay discrimination is that it defies common sense. Let's say I own a company and I am employing only men. Is it really true that I could fire all the men, replace them with women and lower my cost of labor by 23%? If I could do that why wouldn't I? If I were stupid enough not to do it, wouldn't a competitor of mine do it and drive me out of business?

In other words, if workers received substantially different pay for doing the same job, an employer would have to be leaving a lot of money on the table by not hiring the lower-paid employees. (Remember, most people who believe in pay discrimination also believe most CEOs are selfish, money-grubbing sorts as well.) And it can't just be one employer. In order for pay differentials to persist in entire industries, every employer in the market must be willing to discriminate — including the firms run by women!

June O'Neill, an economist who used to direct the Congressional Budget Office, has spent quite a lot of time looking at the data. In a brief analysis for the National Center for Policy Analysis and in an upcoming study for the American Enterprise Institute she finds that what appears like discrimination on the surface is often the result of other factors that the PFA proponents are inclined to overlook.


John C. Goodman

John C. Goodman is Senior Fellow at The Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts."