Two new aspects of the equal pay debate

BY Andrew Lilico   /  1 February 2018

The issue of equal pay between men and women has been debated at length recently. Here I want to explore two issues that, although they are in my view of deep importance, don’t seem to get any discussion or analysis.

The first flows from the fact that, in a well-functioning efficient economy without improper discrimination, one would expect pay to reflect the value of output. (In technical economic terms, equilibrium wages should be equal to the marginal revenue product — the value of the last unit of output produced.) In economic terms, “equal pay for equal work” is not a matter of trying equally hard or being equally experienced. Rather, it is about being paid equally for work of equal economic value.

In a complex economy, people make various career choices at different points in the life-cycle — eg by sometimes taking a job at a slightly lower level of pay than one might otherwise obtain because that job has better prospects, in terms of the experience and opportunities for subsequent advancement and thus better pay later. So if we want to compare how wages compare to output, we’d really like to know that over people’s whole careers, rather than just at a moment in time.

That’s particularly true in the case of the current labour market, since the relative treatment of men and women has changed dramatically over the past 45 years. A man and woman entering the labour market at 18 in 1973 would now be 63. We should expect little to no insight into how a man and woman entering the labour market today will do, relative to each other, over the next 45 years, from the relative salaries of men and women who are 63 now.

What we need, instead, is some way to estimate how the output of men and women relates to their salaries. That’s not easy to get and we do not have good data on it at all. That means that, in truth, despite all the talk of a “gender pay gap”, we simply have no idea about how the pay of men and women entering the labour market now, or over, say, the past 15 years, does or does not reflect the value of their output. I wish we did, but we don’t.

But now suppose that men and women received exactly the same pay, relative to their output. Would that tell us that there was no discrimination against women in the workplace? No it would not, because it’s plausible that what actually happens is that women are not offered the same opportunities as men to maximise the value of their output.

Does it make any difference whether a “pay gap” arises because women are not paid the same for the same value of output or because women are not given the same opportunities to maximise their output? Absolutely it does! If women are not being paid properly according to their output, that is an issue of salary policy at recruitment, performance reviews and salary increments. If women are not being allocated to tasks where they could be most productive, that is a matter of resource allocation policies, eg in project management. If you misdiagnose a resource allocation issue as a salary issue, you will end up over-paying unproductive women whilst simultaneously denying those women the opportunity to maximise their output — the worst of both worlds and damaging to the economy and wider society in the process.

The points of that first issue was that society may let women down, but not do so in the way we normally assume, so we end up with mis-directed debates where the “solutions” may make things worse rather than better. Our second issue is like that as well.

On average, men and women differ, biologically, in various ways. That isn’t simply size, but also hormone flows, vulnerability to various illnesses and natural aptitudes. One classic form of debate goes something like the following. Person A says “Women aren’t seen performing task X,” say, being an engineer or managing a large multinational, “so society must be biased.” Person B responds “But women on average don’t want to do X or some common characteristic of women means the average woman is not as good at X as the average man, so you’d expect fewer of them doing it. Here’s the evidence that shows that.” Person A responds “But that’s only because our culture makes women choose that or have that negative tendency.” But Person B counters “No. Women have a genetic tendency to choose or act that way, as shown by this, this and this studies.”

Such debates seem to me to miss a really key point. Over thousands of years of human civilisation we have learned that various behaviours are undesirable, and we train ourselves, our children and our employees out of them. But is it not plausible that we have done better at training men out of their natural biological weaknesses than we have at training women out of theirs?

Suppose, for the sake of discussion, that it were true that men had a natural biological tendency to respond to potential conflict with anger and violence whilst women biologically tended to give way even when they were in the right. (I am by no means asserting that this is actually how things are. Please just bear with me.) Then suppose humanity has spotted the drawback in angry violence and men have been trained out of it, but women have not been trained out of being overly concessionary.

Then it would be wrong to say “Society teaches women to be overly concessionary.” It’s biology that makes them that way, not society. But to say “It’s biology that makes women overly concessionary, so society has not failed them” is also wrong. Society has, in our imagined case, let women down — not by making them act against their biological nature but by failing to do just that.

I think it’s plausible that our moral and ethical and honour and self-discipline codes have, for thousands of years, tended to be more directed at countering men’s natural weaknesses than women’s natural weaknesses. That would mean that many of our debates about what society “trains women to do” miss the point, just like the debates about whether women get “equal pay for equal work”.

For our society to get the most out of women, we need to teach them to restrain their natural impulses where those are harmful, and we need to allocate women to tasks where they can be most productive. Many of our current debates seem to me to neglect these two fundamental points altogether.