Should the SEC make it illegal for public companies to employ men?

Today the President of the United States told us that men are paid 30 percent more for doing the same work as women. See this New York Times story:

 “America deserves equal pay for equal work,” he said. Noting that it was “Equal Pay Day,” he said a woman who worked in 2013 had to work this far into 2014 to catch up to what a man earned by the end of last year.

“That’s not fair,” Mr. Obama said. “That’s like adding another six miles to a marathon.” He added: “America should be a level playing field, a fair race for everybody.”

The president, as he has in the past, reiterated that it was “an embarrassment” that women on average earn 77 cents for every dollar men make.

Presumably the President would not mislead us with false data. Thus it is an established fact that companies who hire men are paying a 30 percent premium, presumably to golfing, fishing, and flying buddies of the (male) executives. Perhaps this is an acceptable practice for a private company, but why should managers at a public company be allowed to steal from shareholders in this manner?

President Obama could use his executive powers to have the Securities and Exchange Commission make it illegal for public corporations to hire men. Typical companies spend between 20 and 50 percent of their revenue on wages. Some companies have a male-dominated workforce. Thus a 25 percent cut to these costs, achieved via the stroke of a government pen, would improve profitability by as much as 12 percent of revenue, an enormous boost for the typical public company (S&P 500 operating profit margin is about 10 percent of revenue).

[Note that this would also yield a big boost to state and federal treasuries, since roughly 40 percent of these extra profits would be collected in tax in the typical state.]

7 Comments

  1. John Galt

    April 9, 2014 @ 12:08 am

    1

    Meanwhile, the White House pays female staffers 12% less than males for “equal” work:

    http://www.nytimes.com/2014/04/08/us/politics/as-obama-spotlights-gender-gap-in-wages-his-own-payroll-draws-scrutiny.html?_r=0

  2. George

    April 9, 2014 @ 2:27 am

    2

    As you imply, the 77% statistic is misleading. It’s calculated by comparing median wage of women who are employed full time and median wage of men who are employed full time. I’m not sure it’s “false data” but I’m not sure it’s useful either.

    A lot of the gap is explained by differences in educational attainment, work experience, occupation, career interruptions, part-time status, and overtime worked. I don’t find this surprising.

    I was surprised to learn that there’s a big difference when you compare total compensation (wages plus benefits) instead of wages. Apparently women are more likely to prefer a lower wage job that offers more generous benefits.

    https://www.stlouisfed.org/publications/re/articles/?id=2160

  3. Glen Raphael

    April 9, 2014 @ 2:47 am

    3

    Nitpick: Since women make up about half the workforce, a typical company can only save money eliminating the *male* half of their workers.

    Still, when Steve Landsburgh ran the numbers he got the result that a full changeover should raise share prices by 43%. Yow!

    http://www.thebigquestions.com/2014/04/09/the-arithmetic-of-wage-gaps/

  4. paul kramarchyk

    April 9, 2014 @ 3:39 am

    4

    2¢ — The answer to your headline question is no. The SEC should not outlaw the employment of men.

    The argument that women earn less than men is specious. Although it may be true if you only look at women’s earnings vs men’s earnings. But real world earnings are not based on gender, nor should they be. Earnings should be based on performance. Period, end of story. And the person best able to evaluate your performance is your manager (whatever level your direct report is) after taking into account input from customers and coworkers both internal and external.

    Now, I am not so naive to believe that all management is fair. It’s not. But if not management, who is in a better position to evaluate your performance? Surely not President Obama. (fyi.. I’m 65, retired engineer after 40 years in commercial nuclear power plant design and operation.)

  5. Patrick O'Keefe

    April 9, 2014 @ 7:00 am

    5

    While there would be a gain in tax revenue due to increased corporate profits there would be also be a corresponding loss in tax revenue due to decreased wages. While profits are typically taxed at a higher rate than wages, public corporations also have battalions of accountants to help them reduce their tax liabilities. So in the highly unlikely event that Philip’s proposal is adopted, there are some complexities in estimating the impact on tax revenue.

    On a somewhat related note, a friend visiting the MIT Physics department commented on the small number of female faculty members in her group. I checked the department’s web page, http://web.mit.edu/Physics/people/faculty/index.html, and by my estimate there were 96 faculty listed, 7 of which seemed to be women. I was very surprised the ratio was so skewed.

    I have no information on the pay differential between men and women faculty, but if it’s similar to Philip’s number, MIT could replace all the male faculty with females and lower tuition substantially!

  6. philg

    April 9, 2014 @ 7:45 am

    6

    Patrick: Your idea for universities such as MIT to replace highly paid male professors with medium-wage females is a great one, but it might not result in a tuition cut. http://blogs.law.harvard.edu/philg/2014/01/23/tuition-to-faculty-salary-ratio-at-new-york-university/ provides some presumably typical university accounting numbers and it shows that faculty salaries are not a very large expense for a university.

  7. Patrick O'Keefe

    April 9, 2014 @ 7:52 am

    7

    The Washington Post today, April 9th, also wrote in response to Obama’s figures: http://www.washingtonpost.com/blogs/fact-checker/wp/2014/04/09/president-obamas-persistent-77-cent-claim-on-the-wage-gap-gets-a-new-pinocchio-rating/. According to the article, there are other numbers that make the gap appear smaller (but still significant):
    “Obama is using a figure (annual wages, from the Census Bureau) that makes the disparity appear the greatest—23 cents. But the Labor Department’s Bureau of Labor Statistics shows that the gap is 19 cents when looking at weekly wages. The gap is even smaller when you look at hourly wages — it is 14 cents — but then not every wage earner is paid on an hourly basis, so that statistic excludes salaried workers.”

Log in