Pay Equity Now!

by Don Boudreaux on April 8, 2014

in Man of System, Myths and Fallacies, Other People's Money, Reality Is Not Optional, Work

Here’s a letter to the New York Times:

You report that “[t]he president … reiterated that it was ‘an embarrassment’ that women on average earn 77 cents for every dollar men make” (“Obama Signs Measures to Help Close Gender Gap in Pay,” April 8).

Because our President is such a smart man, we cannot doubt that he is correct to explain pay differences across broad groups of workers (such as “men” and “women”) as resulting from unjust discrimination against members of the lower-paid groups.  But our smart President (no doubt because of his super-busy schedule) missed an instance of even greater pay inequity: that between young workers and older workers.  Bureau of Labor Statistics data show that workers aged 16-24 make only 54 cents for every dollar earned by workers 25 and older!*  It’s embarrassing that our nation tolerates such discrimination.

Free-market ideologues will excuse this grotesque difference in pay with assertions such as “young workers aren’t as productive as older workers.”  But our smart President isn’t fooled by these corporate apologetics.  He understands that worker pay is set arbitrarily by firms run by executives with biases against people who are not like them - biases so deep and powerful that each of these executives willingly sacrifices the extra profits that could be made by offering to hire, at slightly higher pay, underpaid young workers (and women) away from rival firms.

Because Mr. Obama knows that worker pay is determined by employers’ whims and prejudices, he will understand that the only sensible explanation for the disgracefully low pay of young workers is discrimination against those workers.  And so I look forward to our President signing executive orders aimed at closing this shameful pay gap.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* See Table 1.

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