Politics & Biz Post

The Equal Pay Problem

Is There a Solution?

Written by Gregory Smith Art by Alan Smithee

We are ever at odds with ourselves. The depressed economy has plagued us for nearly four years now. With unemployment stagnant at over 8% and wages essentially frozen, the promise recovery goes unfulfilled. Consumer spending is not rebounding as quickly as hoped and the immediate economic outlook is more of the same. As the national election season heats up, the most clearly drawn battle line has been over courting female voters. Against that backdrop, the Paycheck Fairness Act was revived and quickly shot down by the Senate this week. Political maneuvering aside, there are several reasons for pursuing income equality in America; but really, we only need one: inequality breeds division and division breeds weakness. Since that argument has proven ineffective in driving change, we shall build a more thorough case.

Economic Recovery:
Since consumer spending is so critical to our economic health, increasing female salaries to match their male counterparts would put more disposable income into the market. More disposable income leads to increased consumer spending which leads to larger profits for businesses which leads to job growth which leads to more disposable income in the market which leads to…economic recovery. The counter argument is raising employment costs would lead businesses to contract employment which would increase unemployment which would remove income from the market…and on through the counter-cycle. The problem with this argument is it assumes the immediate increase in incomes would not translate to immediate increased spending. The average savings rate as calculated by the Bureau of Economic Analysis has hovered around 5% for several years. The safe bet is greater incomes lead to greater spending; for evidence see: the 20th century.

Protecting the wealth-accumulation interests of the few at the cost of the economic health of the many is bad capitalism, worse politics, and immoral.

Free Markets Function on Information:
Wages are a business cost no different than the price of lumber or steel or wheat or any other commodity. Labor is the essentially the only business good where price information is held in secret. Imagine you went shopping for a new television, only no stores displayed prices. At each stop, you went through a lengthy interview and at the end the store made a take-it-or-leave-it price offer. You have no way of knowing what anyone else is paying for the television and talking about it is strictly prohibited. The market inequalities would soon undermine the retail television businesses. This is how we treat labor. Pay rates are held as proprietary, super-secret business information on par with the recipe for Coke. Why? So businesses can artificially suppress labor costs and consolidate power over access to employment. This results in severe inequity in pay and poor decisions in starting salary prices. Clandestine compensation leads to pay dependent on individual economic awareness or necessity not performance and contributions to profit growth. Distrust and suspicion disgruntle employees and lead to poor performance.

Inequality is Unjust
A famous experiment on compensation and fairness among capuchin monkeys by Franz de Waals and Sarah Brosnan demonstrates how inequality impacts social order. Several studies now have made it clear we perceive obvious displays of inequality negatively. Our happiness is directly impacted by these displays (consider how you react when confronted by the realities of homelessness). Keeping pay secret masks the problem so we can feign ignorance and maintain our fragile bliss. We do not escape the toll. You know your mother, grandmother, sister, aunt, wife, daughter, are all extremely likely to be underpaid relative to males doing the same work, or similar work requiring equal effort. We try to rationalize with bad arguments about women valuing time off greater than higher pay or investing in childrearing at a knowing cost to their career. The slew of common excuses fails to address the underlying issue of inequality. It undermines our happiness, devalues the contributions of over half our population, and limits our spending and saving power.

Fairness is difficult concept. The natural world seems to operate without any apparent sense of fairness. Yet it is the fundamental reason for gathering ourselves into societies and without conscious effort we react negatively where we find inequality. Protecting the wealth-accumulation interests of the few at the cost of the economic health of the many is bad capitalism, worse politics, and immoral. Our history has been largely defined by our struggles for equality; it is time to end our commitment to unfair wage disparities. It is time to stop discriminating against ourselves and strength our economy and country through unity.

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