Monday 27 June 2011

Equal pay

Auckland university economist Ananish Chaudhuri endorses the Greens' campaign for equal pay.
Women, here and elsewhere, are not asking for a hand-out. They are asking to be paid the same wage as men for the same work, which is fundamental to democratic ideals of equity and justice. Green Party MP Catherine Delahunty's bill, which proposes to amend the Equal Pay Act by allowing for gender pay comparisons, will help reduce the disparity. It is an important step forward for achieving the goal of gender pay equity.
Ananish cites some of the empirics on gender pay gaps, noting that a reasonable proportion of the pay gap remains after correcting for observables other than gender (although this depends a whole lot on which country's data you pick). But we have to remember that if a whole pile of observables are highly correlated with gender, as has to be the case if the raw pay gap is cut back a pile by correction for observables, then it would be surprising if there weren't also unobservables that varied by gender and affected pay. A reasonable coefficient on gender then can be picking up the effects of unobservables other than gender that correlate with pay. And note also that while there may be a gap in straight pay, total compensation bundles include a whole lot of non-pecuniaries valued more highly by women.

Delahunty's amendment would require firms report pay by gender, allowing easier enforcement of current equal pay legislation.
The proposed changes meant workers and unions would be able to request information on pay levels by gender in their workplaces to assess whether the Equal Pay Act was being applied.
And legal risks then increase for firms with differences in average salaries, even if such differences disappeared after correction for the usual confounds like experience, time out of the workforce, hours worked, and so on.

One risk of strengthening equal pay protection: young women become less likely to be hired because the firm then bears greater risk in case of maternity. French data shows firms show little gender bias in hiring in age cohorts where maternity risk is low but are reluctant to hire women where maternity risk is high; French firms bear high costs in case of maternity leave. Such costs are lower in NZ, but not non-existent. Firms that would otherwise let salary differences clear up the costs of flex-time arrangements or more off-job responsibilities will fear employment court action. It's cheaper and less legally risky to hire fewer women in the first place.

It's highly unlikely that Delahunty's bill makes it to the floor. But if it does, I'll have to work out terms for a bet with Ananish.



  1. “And note also that while there may be a gap in straight pay, total compensation bundles include a whole lot of non-pecuniaries valued more highly by women.”

    I would be a case in point. With a huge household (children + childrens' boyfriends + homestay student), sports after school etc, etc, flexible work hours are worth probably $2000-$4000 to me.

    And even if there is some residue of genuine discrimination, is that really such a terrible, terrible thing that it requires regulation? I tend to think that market forces will sort these issues out over time. And it's hardly in the league of a rigid caste system or genocide or an abusive childhood (which truly does stunt an individual's opportunities). In my view, some people just need to harden up.

    Although what Alasdair Thomson (who I feel lurking, delicately unmentioned, at the edges of this topic) said was simplistic and lacking nuance, there was something to it, and the outrage about his statments is way over the top (though I have to say I did enjoy Homepaddock's corresponding post about manflu).

  2. @Dragonfly Agreed, except I've seen no evidence one way or the other on whether there are any substantial differences in sick days taken by gender and so can't weigh in on the Thomson conjecture.