Wednesday, May 22, 2019

on the "gender wage gap"

From a FB thread...

Agreed. We have to weigh the efficiency of a given market vs. the counter-hypothesis (pun intended?) of wildly inefficient markets despite self-interested behavior and a lot of money on the table.

In contemporary terms in developed countries, most labor markets will feature something closer to the former than the latter. (There are notable counter-examples, most of which have significant govt involvement to reach the non-competitive outcome-- e.g., the NCAA's cartel on revenue-generating sports today or slavery in the past.) If companies are generally profit-max; if workers like to get paid; and so on, then we wouldn't expect systematic and significant under-compensation-- certainly, to the tune of 25%, as is often imagined with the "gender wage gap". With such a fantastic set of assumptions required, we'd instead look for other answers-- and find them quickly-- in recognizing that the aggregate stat used here is garbage, since (to your point) it holds so little constant. In a word, we should make sure to avoid the ceteris paribus fallacy in both our analysis AND our statistics.

As to the 1950s in the Deep South, that's complicated. Whatever markets wanted to do, state/local govt were especially active in bolstering racism. (The Feds did a ton too!) Through law, state/local govts engaged in discrimination-- and certainly encouraged violence and discrimination through their selective enforcement of laws. So, whatever markets might have done on their own, govt certainly had a big hand-- if not, by far, the biggest hand-- in perpetuating discrimination.

I love Walter Williams' point about this in the context of South African "apartheid": If everyone was a racist, you wouldn't need any laws; the racism would be self-enforcing. You need laws when there is a significant number of folks who are **not** racist. (Or to be clearer, they're not racist *enough* to avoid profitable ops to sell, employ, rent, etc.) Bottom line: you need enough racists to empower a govt to engage in racism, but you also need a govt to enforce a racist cartel.


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