If an employer could hire a woman to do the same job as a man for one-fourth less pay, who do you think the employer is going to hire? The woman or the man? That’s a no brainer. Or, a least it’s a no brainer if employers care anything about making a profit.
But if you listen to Hillary Clinton on the campaign trail, we are being asked to believe that is exactly what is happening. And it’s not just one employer. In order for there to be persistent differences in what men and women are paid for the same work, entire industries have to be discriminating. Every employer has to be voluntarily choosing to have higher labor costs because …. well …. maybe it’s because all these firms are managed by misogynists who hate the idea of wage equality so much that they don’t care what their profit margin is.
If that sounds silly, it is silly. But before turning to what economists have to say about this issue, let’s turn to the matter of Secretary Clinton’s hypocrisy.
During her time in the U.S. Senate, Clinton paid women in her office 72 cents for each dollar paid to men, according to a report by Washington Free Beacon. Analyzing data obtained from official Senate expenditure reports, the Free Beacon concluded that the median annual salary for female staffers was $15,708.38 less than the median salary for men, between 2002 [and] 2008. That’s about a 28 percent gender wage gap!
The Free Beacon also analyzed the wages of employees who are working on Clinton’s presidential campaign. In May, women on her staff earned 88 cents for each dollar that was earned by men. In June, the campaign staff grew by 55 employees and women fared even worse, earning just 87 cents for each dollar earned by men.
So does Hillary get the hypocrite of the year award? Not so fast. FactCheck.org re-did the numbers and concluded that there are many issues to consider, including part-time versus full-time work and employee turnover. By one way of calculation, the median wage of men versus women on Clinton’s Senate staff were pretty much equal.
Still, this much is clear. There is no evidence that Clinton tried to make the male and female wages in her office equal, just like there is no evidence that other employers are trying to make them unequal. All indications are that Clinton behaved like a normal employer. She tried to get the best quality work she could, given the wages the market forced her to pay.
But enough speculation. The whole issue of how much people are paid and why has been studied and studied a lot. June O’Neill, an economist who used to direct the Congressional Budget Office, and her husband Dave O’Neill have produced a comprehensive review of the economics literature on this issue and they find little evidence of discrimination in the labor market.
In comparing the wages of different workers, adjustments have to be made. Women tend to enter lower-paying occupations than men, on the average. Also, men and women differ in the amount of work they do. Men are more likely to work full-time; and among full time workers, men work 8%-10% more hours than women. Also, men typically accumulate more continuous work experience, while women are more likely to drop out for child rearing or care giving. Continuous work experience typically translates into higher productivity. According to the O’Neill’s, the gender wage gap shrinks to only 3½ % when adjustments are made for work experience, career breaks and part-time work.
So am I saying that no one is discriminating? Of course not. Court cases prove that discrimination is alive and well in America. But there is a difference between individual behavior and market behavior. Individuals can discriminate, even though the market as a whole is not discriminating. Similarly, regulation can affect the behavior of individual employers without having any perceptible impact on the market as a whole.
Those of us who are in the position to hire and fire employees know that lawyers are involved every step of the way. They tell you what you can and can’t say in a job interview. They approve your employee handbook. They tell you what you can and can’t do with respect to employee benefits. They tell you what must be in every employee’s file. They tell you what you can and can’t do if you fire someone. In short, there is no free labor market. Employment in the United States is totally dominated by labor law.
Aside from the enormous costs in terms of time and money, what difference does all this make? Surprisingly little. The O’Neill’s find no evidence that anti-discrimination policies have made a difference, including the actions of the Equal Employment Opportunities Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP).
The O’Neill’s findings are consistent with economic theory. If workers receive substantially different pay for doing the same job, an employer would have to be leaving money on the table by not hiring the lower-paid employees. 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 and minorities.
Earth to Hillary: It ain’t happening.