Opinion and Economic Analysis

Hicks: Obama pitches gender pay gap to the gullible

April 26, 2014

For the purposes of this column, let us assume that businesses attempt to maximize profit. Also let us recount President Obama’s claim that women earn only 77 cents for every dollar earned by men. Along with a nice dose of high-minded outrage, he argues this must be remedied by legislation.

This leaves us asking, if corporations could increase their profits significantly by firing men and hiring women, would they not? Even supposing the extreme assertion that corporations exist to reinforce white male privilege, couldn’t we expect IBM, Yahoo, ADM or the host of other companies with female CEOs to have tried this method? Yes, they would.

The president willfully misleads. We must remain thankful he wasn’t talking about health plans.

An honest examination of wage gaps isn’t difficult. If we separate people into two groups by age, education, gender, race, occupation or almost any other factor, their average wages differ in some way. But this sort of comparison doesn’t tell us much.

If we use statistical methods that account for multiple characteristics, wage differences for most factors disappear. Occupation, education, job tenure and experience explain almost all wage differences; gender, almost none.

To say there is a 77-percent wage gap requires one to be either stupid or electioneering (or both). While this deliberate untruth is designed to stem short-run electoral losses, I doubt the effectiveness of this approach because stupid folks are less likely to vote in midterm elections. Still, anything that changes the debate from health care will be welcomed by many facing election this fall.

I am worried about the long-run effect on this debate.

We do have imperfections in labor markets that lead to gender imbalances. Some occupations and industries tend to be dominated by men, others by women, and these industries have earnings differences. I think it would be better if young people didn’t view any occupation as a gender-specific career, but this would not end the issue.

Apparently, women tend to give birth more frequently than men. This has labor-market implications for both genders and for the family, which are obvious. While wage differences disappear as men and women choose occupations and work patterns unrelated to gender, the current U.S. birth rate suggests that is not what most households want.

This issue should not be so trivialized that it is used to animate political desperation. Discrimination of this sort is simply wrong on many dimensions and insofar as demagogues abuse the willing ears of gullible rubes, honest deliberation is crowded out. We ought to hope for better, which reminds me of a campaign slogan.•

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Hicks is director of the Center for Business and Economic Research and a professor of economics at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.
 

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