Freeman

ARTICLE

Are Women Being Victimized by the Market?

Pay a Woman Less Than She's Worth and You Hand a Golden Money-Making Opportunity to a Competitor

APRIL 01, 1998 by LAWRENCE W. REED

One of the many false but frequent criticisms of the marketplace is that it discriminates against women. It goes like this: if the market is fair, why do women own fewer businesses and earn less than men for doing the same work?

Groups organized for the purpose of getting government to intervene insist that women are victims of widespread discrimination in America, held down by the “glass ceiling” of male bias. They paint the market as a place where silly prejudices determine wages, where it actually pays for employers to exploit an entire gender of employees, where men conspire against businesses owned by females. These groups propose a range of harmful, redistributive pseudo-remedies: wage controls, compulsory quotas and affirmative-action schemes, daycare subsidies, and the like.

Economists have demolished this criticism in many venues (including The Freeman), but it comes up again and again. So again, here’s a rebuttal.

In “Women’s Figures: The Economic Progress of Women in America,” published in 1996 by the American Enterprise Institute, Diana Furchtgott-Roth and Christine Stolba showed conclusively that the marketplace is working for women far better than its critics admit. For instance: when all factors, such as experience and life situations, are held constant, women between the ages of 27 and 33 earn 95 to 98 percent as much as the average male worker—a statistically insignificant difference.

More good news: from 1987 to 1992, the number of women-owned businesses in America rose by 43 percent. Today, women earn the majority of associate’s, bachelor’s, and master’s degrees. Nearly 40 percent of doctorates are awarded to women. And during the past decade, the number of female executive vice presidents more than doubled and the number of female senior vice presidents increased by 75 percent.

Skeptics might be tempted to say that it wasn’t women’s efforts or the marketplace that explain these facts, but sex-based preference programs encouraged by government. Wrong again. An analysis by Sally Pipes and Michael Lynch in the Heritage Foundation’s Policy Review debunked that myth, too. Pipes and Lynch proved that more women are going to college and that this is the primary reason for the significant advances in female earning power.

In 1960, for example, only 19 percent of bachelor’s degrees were earned by women, but by 1995 women claimed a whopping 55 percent. Over the same period, women increased their share of lucrative professional degrees—MBAs, MDs, and JDs—by at least 500 percent. The increase in college enrollment is a result not of government-enforced preferences, but of changing cultural patterns and personal choices that enable women to excel in fields formerly dominated by men.

The so-called “wage gap” between men and women, say Pipes and Lynch, is due not to senseless discrimination. It’s caused by statistical differences in age, education, and continuous years in the work force. Because women experience more interruptions in their working careers than do men—usually because of marriage or childbearing—the wages they can command in the market are slightly discounted. That is not unfair; indeed, it is perfectly rational economic behavior on the part of employers concerned about their bottom lines.

The Detroit News (April 25, 1996) showed that what differences exist between the wages of men and women are largely a consequence of lifestyle choices: “According to the U.S. Census, men on average spend 1.6 percent of their work years away from the job; women are away 14.7 percent. Ten years of seniority raises wages more than 25 percent, according to government figures. [Former] Labor Secretary Robert Reich may opine that women are ‘unable’ to build seniority, but men are ‘unable’ to give birth.”

“Nor is there evidence,” says the News, “that biology is destiny. Women hold triple the percentage of top management jobs compared with similarly ‘seasoned’ males. And 81 percent of Fortune 500 boards feature women directors; a third of the companies have more than one. Women also own 7.7 million businesses, employing 15.5 million workers—a third more than employed by Fortune 500s.”

If there were widespread or substantial discrimination against women by men in the marketplace, then one would expect to see female employers paying their female employees more than male employers pay their female employees for the same work. Not so. No evidence. Zip.

No one should deny that some men, even some male employers, discriminate against women in ways that cannot be explained by lifestyle choices or impersonal market forces. The point is, most are smart enough not to because they understand that it’s self-defeating. Pay a woman less than she’s worth and you hand a golden money-making opportunity to a competitor.

A fascinating 1994 book, The Myth of Male Power, takes the charge of male discrimination against women and turns it on its head. It is encyclopedic in its presentation of previously unpublished facts and figures. The author, San Diego writer and consultant Warren Farrell, is more than qualified to address the subject: he is a former three-time elected male board member of the nation’s foremost radical feminist outfit, the National Organization for Women.

Farrell says that men account for 94 percent of the occupational fatalities each year. Undoubtedly that stems from the fact that men make up more than 95 percent of the work force in hazardous occupations.

Though men enjoyed virtually the same life expectancy as women as recently as 1920, they now live an average of seven years less. Female longevity has soared almost 50 percent in the past 70 years.

Women do more housework than men, but men do more workplace work. On average, men labor an average of 61 hours a week (counting work inside and outside the home), while the figure for women is 56, says Farrell. His conclusion: if men are oppressing women, it sure doesn’t show up in the numbers.

In the end, the fuss about male discrimination against women in the marketplace is much ado about very little, with a lot of carelessly unexplained figures tossed about that, in any event, hardly argue for government to coercively interfere with privately arranged contracts and relationships between consenting adults.

ASSOCIATED ISSUE

April 1998

ABOUT

LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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