Profit opportunity if women earn less than men?

Saturday’s New York Times carried an article “How to Attack the Gender Wage Gap? Speak Up”, pointing out that women earn only a fraction of what men are paid. The Times cites some numbers: “77 cents for white women; 69 cents for black women. The final dollar — so small that it can fit in a coin purse, represents 57 cents, for Latina women.”

While for the non-profit organization described in the article this is seen as a problem, a profit-minded business owner might see this as an opportunity. Why not find an industry with mostly male employees, offer jobs at 57 percent of the current wages in that industry, attract an all-Latina workforce, and crush the competition with labor costs that are a fraction of those in the rest of the industry?

It seems odd to me that this business strategy is never described by folks who decry wage disparities among groups. At a party the other night I met a young man who is in law school and hopes to, upon graduation, do “public interest” work. He cited the statistic that women get paid only 74 percent of what men earn for exactly the same work. He said that he had gone to “socialist summer camp” as a child and still believed in most of the tenets that he had learned, e.g., that corporations are soulless profit-seeking machines who would destroy society in pursuit of the last dollar. He cited Walmart as an example of the worst possible enterprise. I asked “Couldn’t Target then destroy Walmart simply by hiring an all-female workforce and undercutting Walmart on costs? Consumers don’t usually check to see who works at a big box store before buying paper towels on sale.” His explanation was that otherwise heartless capitalists are generous when it comes to men. In order to perpetuate the patriarchy they are happy to pay a 30-percent premium in order to have a man in a job that a woman would do equally well at a lower wage. This seems potentially plausible for managers in government who can steal from taxpayers in order to indulge whatever favoritism they might wish to use in employment. It also seems potentially plausible for managers and board members at public companies who can steal from shareholders and pay people more than a market wage (see Bob Nardelli at Home Depot and Michael Eisner at Disney, for starters!). But it is tougher to explain why an individually-owned or family-owned business would do this. Would you steal from your children in order to pay a man $100,000 per year to do a job that a Latina would do for $57,000 per year?

[Separately, does this wage gap exist in other countries? Foxconn is frequently pilloried as among the world's most evil enterprises, enslaving workers in order to fatten Apple's profit margins by making iPads at the lowest possible cost. Yet http://news.cnet.com/8301-13579_3-57406751-37/apples-supply-chain-a-portrait-of-a-foxconn-factory-worker/ says that about 65 percent of Foxconn's factory slaves are men. If women would do the work for less, why hasn't Foxconn figured that out?]

17 Comments

  1. Simon Lyall

    December 17, 2012 @ 2:32 pm

    1

    The Economist wrote an article last year about foreign firms in South Korea doing just this sort of thing:

    http://www.economist.com/node/17311877

  2. Patrick

    December 17, 2012 @ 2:37 pm

    2

    A reasonable question. Another that is brought up in the article, only to be studiously ignored, is accounting for differences in education, taking time off to raise children, pay differences in different fields, etc.

    It does say this: “In October, the American Association of University Women — co-sponsor of the Mount St. Vincent program — offered a report called “Graduating to a Pay Gap,” in which it determined that in their first year out of college, women working full time earned just 82 percent of what their male peers did, on average. Again, women’s choices — college major, occupation, hours at work — could account for some of this. Even so, the A.A.U.W. determined that one-third of the gap remained unexplained.”

    So according to this study, when you do adjust for education, etc. the gap is not 77/69 cents per a man’s dollar, but actually only about 94 c per dollar. (100 – 1/3(100-82)) Not quite as dramatic, is it?

    We may ask why men are over-represented in STEM fields that tend to pay more. Maybe women just don’t want these jobs. In any case, it’s a separate question. But it’s just kind of sad to have an article that essentially says, “Women get paid less than men. But when you actually analyze it, the difference due to pure sexism appears to only be about 6 cents per dollar. But we’re just going to stick with the 77 cent figure anyway.”

  3. guest

    December 17, 2012 @ 3:41 pm

    3

    Alan Greenspan in his autobiography tells a story how he staffed his economic consultancy firm with mostly women for precisely because they were less expensive.

    http://books.google.com/books?id=mBGE9JycgrEC&q=“women%20economists”

  4. jerry

    December 17, 2012 @ 4:30 pm

    4

    Yeah, that wage gap discrepancy has been debunked many times, and even debunked by more intellectually honest feminists.

    Here is Former Labor Secretary Robert Reich, explaining that the portion of the gender wage gap due to bias and prejudice is about 25% of the total gap. That is 75% of the gap is due to various career choices and career preferences that differ between men and women, and the remaining 25% is due to bias and prejudice. So if the wage gap is 24 cents on the dollar, the wage gap due to bias and prejudice is 6 cents. Still something to think about and work on, but a whole lot less inflammatory than 24 cents.

    http://www.freakonomics.com/2008/05/01/robert-reich-answers-your-labor-questions/

    “Q: I’d be interested to know your thoughts on the feminisation of poverty and the male-female wage differential. How much of that is due to career choice?

    A: Rough estimate: About 50 percent of the differential has to do with different career choices made by women and men. Twenty-five percent involves greater time women spend on care-taking of children and elderly relatives. The other 25 percent is due to bias and prejudice in the labor market.”

  5. Glen Raphael

    December 17, 2012 @ 5:03 pm

    5

    As I understand it, the real difference is between *married* women – especially those with kids – and everyone else, male or female. Married women make different career choices. Women who never marry and stay in the workforce continuously for a few years tend to earn about as much or more than men of similar status, depending on who does the measuring. Or at least that was true last time I looked at the issue, many years ago.

  6. Alan Jackson

    December 17, 2012 @ 5:23 pm

    6

    You should read Basic Economics: A Common Sense Guide to the Economy, it talks about this issue specifically. The main answer is simply that women leave the workforce to have kids. If you compare men vs similarly aged women with no kids, the women actually make slightly more in many studies. Another area is that men typically are willing to do more dangerous jobs (92% of job fatalities are men), which pay slightly more.

    The pay gap may still exist, but it is a very complicated issue with a lot of bad science going on and being quoted. You are exactly right that if there were no reason other than discrimination, then there would be companies that would have figured it out and had a huge competitive advantage.

  7. philg

    December 17, 2012 @ 8:26 pm

    7

    Patrick, et al: Even if the gap is “only 6 cents” that’s still a big enough number to motivate most business owners. Labor is the biggest cost for a lot of businesses. Why wouldn’t they want to cut 6 percent from their largest cost?

    Jerry: I am not sure that Reich is credible, despite having been a top government official (remember that the U.S. government has a track record of failure! Castro and his brother are still running Cuba, for example). A big pay gap due to “bias an prejudice”? If I could destroy my competitors and get rich by giving up my bias and prejudice, why wouldn’t I do it? And if I wouldn’t do it, why wouldn’t someone else? And if that someone else wouldn’t do it, why wouldn’t there be a business manager out there who was not afflicted by bias and prejudice and who therefore ended up crushing all of the competition that was overpaying men due to bias and prejudice?

    [Note that the necessary flip side of "women are underpaid" is that "some idiots are overpaying men"]

  8. Innocent Bystander

    December 17, 2012 @ 10:39 pm

    8

    Here is the story of someone who tried this, staffing her consultancy firm with only women. TL;DR: The company went bankrupt in a whirlpool of office politics, back-stabbing, absenteeism and general non-accountability and the work not getting done.

    http://www.dailymail.co.uk/femail/article-1168182/Catfights-handbags-tears-toilets-When-producer-launched-women-TV-company-thought-shed-kissed-goodbye-conflict-.html

  9. Innocent Bystander

    December 17, 2012 @ 10:50 pm

    9

    Patrick opined:

    > the difference due to pure sexism appears to only be about 6 cents per dollar

    Actually it’s less than that because the studies typically do not take into account all relevant factors. They tend to simply assume that any difference not explained by the factors they considered must be due to sexism. In fact it could be due to relevant factors not considered, or it could be due to interactions between factors.

    For example, years of work experience and hours worked are often considered but not the interaction between those factors. Women tend to have fewer years of experience and work fewer hours per year, which means that their years of experience are worth less in general.

    Some common factors not considered are: willingness to work long hours to meet short term crises (women are generally less willing to do so, on top of working shorter hours on average), women taking far more sick days than men, one week of downtime per month for many women, willingness to relocate, willingness to work in remote locations, willingness to work in uncomfortable or dangerous environments.

    Also, qualifications are often only considered at a very low level of granularity. For example “Bachelor’s Degree”. When in reality a bachelors degree in IT is a very different thing than a degree in Women’s Studies with a minor in English Lit.

  10. Innocent Bystander

    December 17, 2012 @ 10:52 pm

    10

    Simon:

    > Wage arbitrage in Korea

    Interesting that in spite of the alleged irrational discrimination in Korea, their economy is going really well. And the USA, since embracing feminism, has gone from the world’s largest creditor to the largest debtor, among many other moves backwards.

  11. Hubbert

    December 17, 2012 @ 11:18 pm

    11

    Warren Farrell left the board of NOW about the time he started thinking about this issue. His book _Why Men Earn More_ documents that due to affirmative action and political correctness, women often earn more for truly equivalent work.

    One example he gives is to look at a corporation’s vice presidents. On the surface, the female VPs may be paid less than the men. But upon further inspection:
    1) The woman are far younger and therefore substantially less experienced (15 years?) than the men, who have worked their entire careers (30 years?) to reach VP status.

    2) The women are generally from soft divisions like HR without direct bottom-line influence, while the men are more likely to come from critical bottom-line divisions like Sales or Engineering (which are also higher-paying occupations at all levels).

    But then to avoid lawsuits, they usually do bump up the pay anyway. So then you have 35-40 year old women from HR and Corporate Communications and Environmental Responsibility making about 90% as much as the 55 year old VP’s of Sales and Engineering, you see that the the women are quite overpaid, due mostly to having a gender which makes the company’s Annual Report and EEOC filings look better.

    Other factors he mentions are:
    Men generally take more dangerous jobs
    Men generally take longer commutes
    Men generally work longer hours

    He mentions that female sales engineers earn something like 129% of their male counterparts (way easier to get appointments!).

  12. Hubbert

    December 17, 2012 @ 11:24 pm

  13. aisaac

    December 18, 2012 @ 1:22 am

    13

    I’m a tiny cog in Walmart’s management. They are among the most heavily scrutinized companies out there, they’re terrified of being sued, and lefties are out to get them. It could well be that the powers that be at Walmart secretly hate women and would be glad to pay more to men just for the delicious inequality, but they have no way to communicate that to the tens of thousands of middle managers who actually make the decisions about who gets raises and promotions (for the vast majority of the company, excepting senior management), and if you told them to do that, some of them would blow the whistle. They wouldn’t even get away with hinting at it.

    Or maybe they do disseminate this secret order off the record, but I didn’t get the memo, because I happen to report directly to a Latina.

  14. jerry

    December 18, 2012 @ 5:21 am

    14

    Phil,

    ‘Note that the necessary flip side of “women are underpaid” is that “some idiots are overpaying men”‘

    Actually my experience is that some idiots are responsible for many of our woes!

    But 6 cents on the dollar, is a far cry from 23 cents on the dollar. Twenty three cents on the dollar is “Let’s form a national task force”. Six cents on the dollar is “Huzzah! The problem is largely over.”

    That said, when you read report after report of how the 23 cents wage discrepancy is calculated, it boggles the mind in terms of just how misleading and uninformed that number is calculated.

    http://www.huffingtonpost.com/christina-hoff-sommers/wage-gap_b_2073804.html

    Christina Hoff Sommers (AEI) writes,

    “One of the best studies on the wage gap was released in 2009 by the U.S. Department of Labor. It examined more than 50 peer-reviewed papers and concluded that the 23-cent wage gap “may be almost entirely the result of individual choices being made by both male and female workers.” In the past, women’s groups have ignored or explained away such findings.

    “In fact,” says the National Women’s Law Center, “authoritative studies show that even when all relevant career and family attributes are taken into account, there is still a significant, unexplained gap in men’s and women’s earnings.” Not quite. What the 2009 Labor Department study showed was that when the proper controls are in place, the unexplained (adjusted) wage gap is somewhere between 4.8 and 7 cents. The new AAUW study is consistent with these findings. But isn’t the unexplained gap, albeit far less than the endlessly publicized 23 cents, still a serious injustice? Shouldn’t we look for ways to compel employers to pay women the extra 5-7 cents? Not before we figure out the cause. The AAUW notes that part of the new 6.6-cent wage-gap may be owed to women’s supposedly inferior negotiating skills — not unscrupulous employers. Furthermore, the AAUW’s 6.6 cents includes some large legitimate wage differences masked by over-broad occupational categories. For example, its researchers count “social science” as one college major and report that, among such majors, women earned only 83 percent of what men earned. That may sound unfair… until you consider that “social science” includes both economics and sociology majors.

    Could the gender wage gap turn out to be zero? Probably not. The AAUW correctly notes that there is still evidence of residual bias against women in the workplace. However, with the gap approaching a few cents, there is not a lot of room for discrimination. And as economists frequently remind us, if it were really true that an employer could get away with paying Jill less than Jack for the same work, clever entrepreneurs would fire all their male employees, replace them with females, and enjoy a huge market advantage.”

    Ms. Sommers seems to agree with both you and Robert Reich!

  15. Mannerheim

    December 21, 2012 @ 2:09 pm

    15

    Philip’s question is of course rhetorical, the gender wage gap can be parsimoniously explained by:

    - over-representation of men in high-paying fields due NOT to some nebulous economy-wide conspiracy but rather to average neurological differences between men and women that result in men being, on average (DISCLAIMER: MANY EXCEPTIONS DO EXIST BUT WE ARE TALKING ABOUT BROAD AVERAGES HERE) more aggressive, more competitive, likelier to negotiate for raises and promotions, likelier to start their own companies, and higher performers in fields requiring sophisticated abstract, logical thinking like high tech or running a hedge fund.
    - women taking time off from the workforce to raise children (even the prospect that a woman might do this in the future makes her objectively less valuable to the company)

    While women are technically more educated than men as measured by degrees earned, that argument falls apart quickly once you discount fluff degrees in Women’s Grievance Studies and soft social sciences. Also, women probably enjoy an unearned wage premium due to de facto hiring and promotion quotas, and the concentration of women doing non-value-added work in government-mandated HR and Diversity departments.

  16. Renee Reader

    December 30, 2012 @ 7:55 pm

    16

    On the whole, an interesting article and a sprinkling of cogent comments.

    But wow, as a woman, I certainly found some sexist thinking in many of the comments here (some much more obvious than others). A few of you commenters should question your assumptions; others your perceptiveness. It’s just the way business works, deal with it sweetie? Women “probably” enjoy an “unearned wage premium”? Reminds me of white people talking about about how racial discrimination isn’t a problem anymore.

    Lots to disagree with in these comments; I won’t waste my time going into the productivity studies on the poor quality of all that overtime the men are putting in that supposedly makes their experience worth more than a woman’s same year of experience (?!).

    And there’s still a huge discrimination/sexism/harassment problem in that vaunted sales position one of you said was just easier for women because a woman can get appointments more easily than a man (quick, spot the hidden problem in this situation – who controls the money here?). My stepsister was told this year – in 2012 – by the jerk who is her new sales manager that he “doesn’t think women can sell.” Repeatedly, and in those words, believe it or not. Then he continually cancels his weekly meetings with her, which means she doesn’t get information she needs.

    I agree with the general premise that there’s much less explicit discrimination than before and that it’s disingenuous (and perhaps manipulative) to keep reporting the numbers as if they haven’t changed.

    Both in general and in specific ways, it’s easier for a woman today to get a more equivalent salary than in the past. And I was lucky to have a mother in sales, who lent me her sales tapes on negotiation so that I learned how to get paid more during hiring.

    Consider that while women are told to negotiate harder, after being hired, studies show they’re perceived as being pushy or whiny if they ask for more money. So they’re “not a team player” AND they still make less….

    It just isn’t that simple to discount the problem as (dear lord) the women’s fault for not speaking up. It takes a very strong person to buck the system. Maybe it takes a hard look at the system itself.

  17. Renee Reader

    December 30, 2012 @ 8:03 pm

    17

    I meant to add, in regards to Phil G’s original roguish question, “Why not find an industry with mostly male employees, offer jobs at 57 percent of the current wages in that industry, attract an all-Latina workforce, and crush the competition …? It seems odd to me that this business strategy is never described by folks who decry wage disparities among groups.”

    I thought this strategy was what we commonly called a “sweat shop.” ;-)

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