Guaranteed Employment for Lawyers

Our excellent Research Fellow Dr Rachel Hodder warns about potential legal nightmares in the government's proposed pay equity framework.

Last week, the government announced that it would accept the Joint Working Group’s recommendations, which will allow employees to take pay equity disputes directly to their employers.

These changes were motivated by the landmark ruling in the TerraNova case where it was ruled that female-dominant aged care work has been historically undervalued due to gender discrimination. This has opened the door for a flood of similar claims to be made in other female-dominant industries.

The intentions of the changes are laudable but good intentions do not always make good policy. Overseas experience with similar pay equity laws is a good reason to be concerned.

There is little evidence that similar laws have reduced gender pay gaps. Adjusting pay in undervalued female-dominant industries is a blunt tool compared with adjusting pay for individual undervalued female employees in any industry.

Ironically, some studies have demonstrated that pay equity laws have widened the pay gap. Making employers pay more in whole industries reduces the number of jobs available, pushing many women into lower paid work.

A review of similar pay equity laws in Ontario is discouraging. The costs of administering the system ate up much of the available compensation change.

Establishing plans for compensation systems was much easier said than done. These costs were disproportionately felt by small employers where often the administrative costs were more than the recognised pay differences.

Difficult in practiceDisputes turned into a litigation nightmare. Rules to determine what counted as equivalent work seemed simple on paper but were difficult to evaluate in practice.

This led to endless disagreements about what male-dominant industries could be considered as relevant comparators. The main winners of the laws were consultants and lawyers, not women.

One would hope the government has been advised on the likely problems the new laws could encounter based on overseas experience.

It would be very interesting to know just how much warning Treasury or the ministries provided about the difficulties encountered in Ontario, and likely difficulties here. One should be especially careful about the quality of advice in areas where there is a lot of wishful thinking, and a lot of social sanction for even suggesting that outcomes might diverge from intentions.

Meanwhile, The Listener does not give us reason to hope for reasonableness:

The law change won’t be a magic wand. Comparing the relative value of different jobs in disparate industries was a contentious issue within the working party and threatens to be a sticking point in workplace negotiations. A suggestion by the New Zealand Educational Institute that pay rates for teacher aides be linked to those of Corrections officers, whose work entails risks not generally present in primary schools, isn’t a promising start.

The government hasn't drafted the legislation yet; I hope that the government gets some better advice around this stuff before it does.

Feeling Chuffed

It was a great day for the ECON department at Canterbury on Wednesday. Our very own Rachel Webb, successfully defended her doctoral thesis, The Health Economics of Macrosomia. Rachel has been a part of the Department for many years, having previously completed her Bachelor's and Honours' degrees at Canterbury prior to starting her Ph.D. Eric blogged on a preliminary finding from Rachel's thesis here last year.

Rachel's successful defence comes on the heels of some other notable achievements of our recent students: James Graham has just started his doctoral studies at New York University, as one of the 26 New Zealand recipients of a Fulbright Award, and the only one with a degree in Economics; Nick Sander has just started his doctoral studies at the University of California, Berkeley; James Horrocks has recently completed his MBA at Cambridge; and Reza Baqaee is just finishing up his Ph.D. at Harvard.

These are not our only success stories by any means, but the notable thing for me about these five is that they were all in my Honours welfare economics class in 2009. The thing I have enjoyed most about teaching in our Honours programme over the past 14 years has not only been the incredible quality of our students, but also the diversity of their academic backgrounds, in large part because we have made a feature of the fact that one can major in Economics as part of an Arts, Science, or Commerce degree. James Graham and James Horrocks both did double majors in Economics and Philosophy; Nick and Reza completed combined Honours degrees in Economics and Maths, and the same class included students with undergraduate degrees in History, Physics and Finance. Keynes is famous for his statement that a master economist "must be mathematician, historian, statesman philosopher". It is too much to ask that students coming into graduate Economics have studied every one of these other subjects in detail, but the next best thing is to have a class that collectively has that breadth.

Limit fast food outlets?

Should we blame fast food outlets for obesity?

Canterbury student Alice Robertson thinks so. The University's press release on her internship project has been picked up in a few places (Herald, Press). Alice's paper isn't yet available, but I've been promised a copy when it is. It sounds like it's mainly a literature review; she notes Day and Pearce, 2011 as particularly relevant. That paper found clustering of fast food outlets around schools. Such clustering doesn't prove an obesity link, just that the kinds of places that wind up being decent venues for primary and intermediate schools are also the kinds of places where fast food outlets wind up locating.

Robertson suggests limiting the number of fast food outlets near schools.

Rachel Webb is a doctoral student in our Economics department. She's presenting some of her thesis work at this year's NZAE meetings. She hasn't sought any press releases on her work because she likes making sure everything's nailed down before talking to the press office. And so her paper still says "don't cite without permission". But she's said it's ok for me to post on what she's been up to.

She's investigating links between obesity and high birth weights. In her quest for instruments that might correlate with obesity risk but that should not have any independent effect on high birth weight risk, she thought about fast food venue concentration. There's some evidence that such venue concentration affects obesity. If if doesn't independently affect high birth rate risk, then it can be an instrument (subject to the usual validity tests).

The density of different categories of dining establishments with a particular focus on fast food restaurants within the Territorial Local Authority (TLA) area that the woman resides in comprises my next set of instruments. A significant relationship between fast food restaurant density and obesity has been a prominent finding by health researchers over recent times. Rosenheck’s (2008) systematic review of 16 studies concludes there exists a significant relationship between fast food restaurant density and obesity[21]. It is generally agreed that fast food proximity lowers the notional cost of eating high caloric food and can therefore lead to higher obesity risk though the causality of the relationship is disputed [22]. It should not have any direct effect on high birth weight risk. However, like with rurality, there are plausible factors which could correlate with both food venue type and concentration and high birth weight risk. For instance, if unhealthy food venue options tend to concentrate in areas where people tend to be less health conscious for reasons that transcend deprivation level, ethnicity, age, rurality, or wider region then food venue type and concentration may have an avenue of correlation with high birth weight risk outside of the effect on obesity that I am unable to control for and could invalidate its use as an instrument. It is also possible that food venue type and concentration may be correlated with high birth weight risk through the effect of weight gain during pregnancy. Validity tests are required to check the soundness of this instrument.

So Rachel wasn't interested in the effects of fast food restaurant density on obesity per se: she was just looking for plausible instruments. And she's found something rather interesting.

A curious finding from the first stage results was that the fast food restaurants density in a TLA did not have the expected effect on obesity measures. The majority of the fast food chains showed consistently negative coefficients in the first stage and particular chains such as Hell’s Pizza, Burger Wisconsin, and McDonalds frequently showed a significant negative relationship with the propensity to be overweight, obese, and morbidly obese. KFC and Pizza Hut were the only chains to have a generally consistent positive relationship with obesity risk. It is not clear what is driving these findings as both median income of the TLA and the deprivation level of the meshblock have been controlled for suggesting it is unlikely to be socio-economic status, nor could it be the effect of living in urban areas as rurality variables are also included. The overall number of fast food establishments per person in a TLA was generally insignificant so it doesn’t appear to be driven by substitution away from less healthy options such as fish and chips either. More research into the effect of fast food on obesity is warranted. 

So, fast food restaurant density, in her regressions on New Zealand data, tends to reduce the prevalence of obesity. When she'd first presented this to the Department, I'd wondered whether what she was picking up was that folks hitting McDonald's would otherwise have been going to a fish'n'chip shop and eating even worse food; she's checked that, as noted in the blockquote, and that wasn't driving things.

Rachel wouldn't draw policy conclusions from her thesis work. But I'll draw one: we shouldn't be too hasty to ban fast food outlets near schools. I'll draw a second one: had Rachel sought press releases about her work, there would have been less uptake. There's reasonable media demand for panics about fast food restaurants, and about alcohol, and about "the kids these days".