Freeman

ARTICLE

The Fallacy of Comparable Worth

JUNE 01, 1986 by PETER S. HEINECKE

Peter S. Heinecke is the first-prize winner in the college division of FEE’s 1985-1986 Freedom Essay Contest. He is a junior at Princeton University, majoring in politics.

      Following graduation, Peter plans to pursue a career in business, and perhaps eventually enter elective politics. His family resides in San Anselmo, California.

Why the market best determines wages.

Personal freedom forms the basis of the American political system. Since the founding of our nation, politicians and activists have valiantly fought for freedom of speech, the press, and religion. Yet, one freedom, economic freedom, has been consistently ignored or underestimated. Particularly in recent years, those in power have been willing to abridge economic liberty in attempts to remold society in their vision.

These attempts are dangerous because the free market is essential for both prosperity and true freedom. Attempts to alter the market continually fail because their proponents do not understand the workings of the market. They do not believe people can act beneficially unless coerced by government. They are wrong. America’s wealth was not planned by government but created by individual effort. The ability to buy and sell goods and services freely is all that Americans have needed to create a great nation.

A doctrine called comparable worth would end this success. It would have the government tell an employer and an employee engaged in a mutually beneficial relationship that their relationship was illegal. It would have the government prescribe under what terms one person could hire another. It would replace our current successful system of supply and demand with a dangerously unworkable system based on pseudo-scientific studies. It would destroy not only our prosperity but also our liberty.

Proponents of comparable Worth claim that it will end a particularly insidious form of discrimination. They claim that the market systematically discriminates against women. They prove this by studying “all” the factors which comprise a job—working conditions, skills needed, and so on—and awarding a certain number of points for each. The sum of these points is the value of the job. Studies of this sort have shown that workers in female- dominated jobs are paid significantly less than workers in male-dominated jobs for work which is of the same “value.” For example, in a Minnesota study the job of registered nurse garnered 275 points while that of painter received only 185. The fact that the state of Minnesota paid both equally was seen by comparable worth advocates as prima facie evidence of discrimination.

The solution offered to such “discrimination” is alluringly simple: make it the law of the land that all employers must follow these “objectively” determined worths when creating their pay scales. In the same way that companies are now required to pay men and women equally for the same work, comparable worth advocates would have companies pay workers the same amount if their jobs have the same “economic value.”

The essential problem with comparable worth is that its proponents do not understand the relationship between liberty and the market. Wages are not set randomly. Rather, individual choice determines both the supply of and demand for employment. The interaction between supply and demand determines wages. The number of factors in these determinations is infinite because it is based on the personal decisions of all Americans in the workforce. This collective exercise of individual liberty can neither be quantified nor controlled.

Because proponents of comparable worth do not understand this fact, their proposal is plagued by severe logical and implementational flaws. First, the premise that the entire difference in earnings between men and women is due to discrimination is demonstrably false. Second, all extant means of determining the correct pay are hopelessly and inevitably inadequate for such a complex task. Finally, the proposed means of implementing a solution, governmental action, would lead to market chaos and economic fascism. In short, the doctrine of comparable worth is based on faulty assumptions, poor analysis, and unworkable solutions.

Though the feminist movement almost automatically concludes that the disparity between male and female earnings is due to discrimination, the causal link is in fact not so clear. To begin with, studies have determined that between a third and a half of the difference in wages can be directly attributed to differences in education, experience and job tenure. Another important factor is that men and women have different goals and make different career choices. For example, female doctors tend to gravitate toward salaried positions, which allow them more flexibility to raise a family, while male doctors are drawn toward less flexible, but more lucrative private practice. In contrast the wages of presumably career-oriented groups of both sexes are virtually equal. Never-married women with continuous labor force participation receive roughly the same pay for their work as do married, full-time working men. And the difference in pay between single men and single women is only 15 per cent. While discrimination may exist, such factors as education, experience, and individual choice are more important in determining wages. Thus, comparable worth is a repressive system which does not address a real problem.

The Willis Scale

Perhaps the best known comparable worth scale is the Willis scale. It was created in 1973 when the state of Washington commissioned the firm of Norman D. Willis and Associates to determine whether the state was paying equal amounts of money to women and men whose jobs required “a comparable level” of skill. It was the basis of a one-billion-dollar court decision against the state.

If the state of Washington is going to pay I billion dollars to implement a pay scale according to Willis’s guidelines, one would expect those guidelines to be extremely accurate. But they aren’t. In quantifying the worth of a job Willis identifies four factors: knowledge and skill required, mental demands, accountability, and working conditions. Each of these factors is divided into two or three sub-categories. For example, under accountability one of the categories is the impact of one’s work. Consultants using Willis’s manual are advised to award points according to whether the job “impacts on something big or little, or on something in between.” It is frightening to think that the state of Washington is preparing to spend 1 billion dollars to implement a pay scale based on one consultant’s, or even a group of consultants’, inherently subjective interpretation of “big, little, or in between.”

Furthermore, the study uses the demands of the job to determine a monetary basis for its worth. Yet, many jobs offer intangible benefits which are ignored by the study. For example, such subjective factors as prestige, job security, and opportunity for advancement are often as crucial as monetary remuneration in a person’s decision to accept a job. Obviously, it is impossible to quantify these factors and include them in a system. However, to consider money as the only form of remuneration is to subscribe to a fallacious theory of economic determinism. It is to say that employees are only motivated by money. But most employees are smarter than that. Most look beyond salary and enjoy the flexibility of receiving nonmonetary compensation. Comparable worth systems ignore this fact and would invalidate mutually agreeable contracts solely because of salary considerations. Such results demonstrate the unworkable and tyrannical nature of comparable worth.

Another flaw in Willis’s study is the equal weighting given to each category. How can anyone say that the education required of a computer programmer is of the same value as the extreme danger faced by a prison guard? Or that the accountability of a high level bureaucrat deserves the same compensation as the mental demands on an air traffic controller? Individuals, of course, make these determinations for themselves when they choose careers. There is no need for the government to do it again. Comparable worth systems would supersede individual preferences and rigidly weigh each consideration equally. That those weightings have no correlation to the reality of individual choice does not seem to bother advocates.

Thus, at the most basic technical level comparable worth systems are doomed to failure because they are unable to judge accurately those few factors concerning a job which they can identify. This, however, is the least of their problems. There are a multitude of variables which any system is inherently incapable of taking into consideration. The first of these is quality, which the study is forced to neglect because quality can only be applied to a specific person’s work performance. The guidelines formed by Willis make no attempt to differentiate between a slovenly, rude, inefficient secretary and a dynamic, innovative, pleasant one. Worse, the competent secretary will always be considered worth less than any third-rate lawyer.

Supply and Demand

The root cause of the above perversions is comparable worth’s abysmal inability to consider the most crucial factors in determining the value of anything—supply and demand. No matter how dangerous a job is, no matter how many years of training are required to acquire the skills for it, the job is totally devoid of value if there isn’t someone willing to employ a person trained for that job. Consider a person who has developed the ability to juggle running chainsaws. (There is such a person in Venice Beach, California.) Clearly his job requires a great deal of skill, is mentally demanding, is done in varying work conditions, and if there is a crowd around, demands a certain amount of accountability. According to any comparable worth scale, this man should be paid as much as a CEO or nuclear engineer. Yet he survives only on the meager amounts people are willing to toss in his hat. Why? Because there is almost no demand for his services. He performs an almost entirely useless function. But he continues to do it, presumably because he enjoys it. Job satisfaction is another factor which comparable worth scales are inherently unable to measure.

Lest this example seem so extreme as to be a mere aberration, let us look at a more mainstream occupation which pays very little. Buggy whip making was once an extremely valuable skill but you won’t find people paid much to do it currently. Why? Because it is no longer needed. Modern technology has made such a skill useless and thus one cannot make a decent wage doing it. Comparable worth, however, does not have any ability to adjust for change. Once a job is determined to have a certain value, it will always have the same value regardless of whether it serves a useful function. To deny employers the right to adjust wages according to changing circumstances will doom our economy to noncompetitiveness in the world market.

A more current example is the pay scale at Weyerhaeuser, a major lumbering firm in the Northwest. A comparable worth survey done by Willis rated the job of personnel manager at 916 and that of a pulp mill superintendent at 760. Yet pulp mill superintendents make more money. Why? Because it is difficult to find competent, reliable pulp mill superintendents. Thus Weyerhaeuser pays them a high wage to attract qualified people to that line of work. If the government imposes the wage for pulp mill superintendents, Weyerhaeuser will not be able to function.

Herein lies the basic problem with a government-imposed comparable worth scale: Government-dictated wages will distort and eventually destroy the market. Consider what would happen if the federal government mandated wage increases for workers in female-dominated jobs. First, there would be a flood of people, both males and females, who would be attracted to the lucrative wages in these jobs. Most would end up in the unemployment lines because currently there is no shortage of legal secretaries, librarians, or nurses. Second, the courts would be engulfed with suits claiming discrimination according to the new standards. Because every corporation is different, each suit would require an exhaustive study. The cost of the studies, restraining orders, and retroactive pay increases alone would be a serious drag on the economy.

Scarcities and Surpluses

It would not end there. Eventually someone would realize that if it is unjust to pay women less than their comparable worth, it is undoubtedly unjust and unconstitutional to pay anyone less than that person is “worth.” Soon the government would mandate every wage paid to every person in the United States. Since there would no longer be any correlation between one’s wages and the demand for one’s skills, labor would be distributed ineffectively. There would be scarcities of engineers, who don’t rate particularly well on Willis’s scale yet are in great demand, and surpluses in the suddenly high-paying previously female-dominated fields. Weyerhaeuser would be facing a massive shortage of pulp mill superintendents.

This combination of widespread unemployment and labor shortages in critical positions would result in extreme economic stagnation. Obviously the government would be called upon to resolve such a dire economic crisis. Yet officials would have only two choices: repeal comparable worth laws or coerce people into those areas where workers are needed. It is frightening to think they might choose the latter.

The same market factors which are the nemesis of the advocates of comparable worth are also the solution to the problems they seek to solve. A recent study by the Rand Corporation revealed that in past years women have made great gains with relationship to men in terms of wages. Interestingly, the study indicated that Federal laws prohibiting discrimination were not a major factor in the gains. Rather, as women acquired education, skills, and experience which were in demand, they received commensurate rewards. Furthermore, the study concluded that women would increase their gains in the future for the very same reasons. In other words, women entering the work force today are assessing the situation and, not surprisingly, are acquiring the skills necessary to obtain more lucrative wages. Currently, women have the opportunity to earn as much as men, but because of different goals and values, generally do not. Comparable worth would destroy both their freedom to make choices and their economic opportunity. Comparable worth derives its political strength from a variety of emotional, but in the final analysis, irrational arguments. For example, one union official has argued, “When a person whose job requires a college education makes less than a common laborer there’s something wrong.” Is there necessarily something wrong? Does spending four years of one’s life reading books entitle one to a standard of living higher than that of a person who is willing to get his hands dirty and his muscles sore? The answer is yes, if and only if there is a greater demand for, or a smaller supply of, those skills acquired during four years in an ivory tower than there is for the brute force of a common laborer.

The union official’s complaint is indicative of comparable worth advocates’ inability to grasp one incontrovertible fact: There is no such thing as intrinsic economic value. Money is merely a convenient unit of measurement. Price is merely a reflection of what people engaged in free exchange believe something is worth. To impose a price for anything, whether it be a product, a service, or a job, is to suppress people’s right to free and mutually agreeable exchange. Comparable worth, in its attempt to impose an arbitrary and inaccurate notion of justice on the market, denies both men and women the right to exchange freely their goods and services. A woman will not be helped if she is left unemployed because she is barred by the law from taking a job at a wage which she, but not the government, feels is just. The greatest and most tragic irony of comparable worth will be the huge number of people left unemployed because their employers are unwilling or unable to pay artificially high, government-imposed wages.

To sacrifice liberty in a misguided attempt to achieve equality is foolhardy. Governmental determination of wages destroys the source of both America’s economic strength and a sense of justice. The free market is not only a tremendous force against discrimination but also the ultimate bastion of individual liberty. It would be a grave mistake to subvert it. It would be folly to think that the federal government once given the power to determine the wage of every worker in this nation would use that power either wisely or effectively. Comparable worth, under the guise of justice, offers us tyranny and economic disaster. We must reject it. []

“Beyond Equal Pay for Equal Work.” Business Week, July 18. 1983. pp. 169-170. “Comparable Worth: Another Terrible Idea.”

G. Cowley. Washington Monthly, January 1984, pp. 52-57.

“Comparable Worth: The Feminist Road to Socialism,” Michael Levin. Commentary, September 1984, pp, 13- 19.

“A Crazy Idea.” Notional Review, November 16, 1984, pp. 17-18.

“From Bad to Worth.” C. Krauthammer. New Republic, July 30, 1984, pp. 16-18.

“Pay Equity Is a Bad Idea.” Fortune, May 14, 1984, pp. 133-140.

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July 1986

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