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A Third Open Letter to Aparna Mathur

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Dr. Aparna Mathur
American Enterprise Institute

Dr. Mathur:

Following-up my letter of yesterday [2], I offer here an additional point. Your argument suffers, I fear, from an internal inconsistency.

You begin by claiming that there’s a positive externality of women working – one that results in too few women working. You then claim that this externality can be corrected only if government encourages the taking of more paid leave. Yet even if we grant the validity of your claim that the market on its own leads too few women to work, your preferred method of arranging for more paid leave doesn’t solve the problem.

If you’re correct that the positive externalities of women working result in too few women working, it must be true that the market pay offered to women is too low. That is, part of the benefit of women working is externalized on society rather than captured by working women in the form of higher pay.

But your preferred government policy of increasing paid leave by allowing women to pay for such leave with loans drawn against their Social Security ‘accounts’ doesn’t increase women’s pay and, hence, doesn’t internalize this alleged externality.

The feature of your proposal that appeals to conservatives is that workers themselves, rather than taxpayers or employers, pay for their paid leave. But this very feature ensures that, if you’re correct that positive externalities of women working result in too few women working, your paid-leave proposal does nothing to solve the problem.

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

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