Comparable Worth; L.W. Reed

Ideas and Consequences by Lawrence W. Reed Comparable Worth or Incomparably Worthless? P anned a decade ago as "the looniest idea since Looney Tunes" and left to die as an idea whose time ran out before it got off the ground, "comparable worth" is making headlines again. It was raised several times in last fall's elections by candidates who argued that it was a "fair" and "compas sionate" thing for governments to adopt. Comparable worth-known also as pay equity-is not to be confused with "equal pay for equal work," which free markets tend to promote if there's good reason to-namely, when all relevant factors in wage determination are identical across dif ferent labor markets. Besides, equal pay for equal work, for better or worse, is also the law of the land. Equal pay for compa rable work is an entirely different animal. Equal pay for equal work requires, for instance, that a woman be paid the same as a man, or another woman, who is doing ex actly the same job. Comparable worth, by contrast, focuses on paying an entire profession or occupation the same wage as another, very different, profession or occu pation determined by some outside author ity to be of the same "worth" or value to an employer.

The idea is that individual workers who perform jobs of substantially comparable value to their employer should be paid similar wages. If the work done by an Dr. Reed, economist and author, is President of The Mackinac Center for Public Policy, a free market research and educational organization headquartered in Midland, Michigan. accountant is deemed to be as valuable to an employer as that done by a typist, for example, the law would require the two employees to earn the same wage. In Min nesota, firefighters in the city of St. Paul were ranked as having the comparable worth of the city's librarians. When many people seek employment in an occupation for which there is declining demand, the tendency in free markets is for wages to fall, sending a signal that people should look for a different line of work. Likewise, wages rise during a labor short age, sending a signal that more people are needed.

A comparable worth scheme imposed on private sector employers would arbitrarily and effectivelyabolish the role of supply and demand in the labor market. Conditions in the market wouldn't matter, because some authority's" calculation" of the value of one job compared to another would take their place by force of law. Employers and employees can always produce "experts" who will rank jobs dif ferently than any arbitrary formula, which is why imposingcomparable worth would pro duce a playground for lawyers and a bot tomless pit of costly litigation. It rests on the dubious notion that the relative worth of differentjobs can be mystically divined and distilled into a cookbook recipe by "ex perts" who aren't even in the kitchen. Advocates usually tout comparable worth as a tool to end discrimination against women in the workplace. They see wages in 219 220 THE FREEMAN • APRIL 1995 female-dominated occupations lower than wages in male-dominated occupations and assume that the disparity is entirely caused by discrimination. However, many rational factors explain the disparity.

Men, for instance, do not leave their jobs to have children and are less likely than women to leave their jobs to care for chil dren. Men are less likely to move if their spouses must relocate for professional rea sons. Men are usually physically stronger than women and tend to work in jobs that have a higher probability of physical harm. (Men, in fact, account for 94 percent of the occupational fatalities each year.) Differen tials between the pay of men and women exist because women entering the work force generally have less education and fewer skills and are higher risks for employ ers than their male counterparts. The National Committee on Pay Equity claims that women earn only 71 cents for every dollar men earn. Not only does that often-quoted figure ignore the factors cited above, it doesn't even take into account the number of hours or weeks that workers put in. Women, for many reasons, work fewer hours a week and fewer weeks a year than men do.

If employers were guilty of wage discrim ination against women for no reason other than stupidity or the desire to be nasty to the opposite sex, then studies would show that female employers pay their female employ ees more than male employers pay their female employees for equally productive work. There are thousands of women who own and manage businesses and to my knowledge, they pay market wagesjust like their male counterparts do. What happens when an employer decides to pay a worker less than the market wage? That worker soon leaves, gets hired away, or goes into the business himself(or herself). High turnover boosts the employer's train ing and transition costs, which can quickly make that "cheap" employee a very expen sive one. In free markets, the employer must heed the signalsof supply and demand or see the competition benefit from his shortsightedness. These days, labor is highlymobile and information travels faster than ever before, so markets work better and quicker to bring about fairness and efficiency than their critics are willing to admit.

Some comparable worth advocates un willingto overturn supply and demand in the private sector have focused instead on put ting it in place in the public sector. In 1984~ Minnesota became the first (and so far, the only) state to mandate that all local units of government devise and implement com parable worth schemes. S1. Paul is a city whose experience with the law typifies that of local government across the state: $32 millionin additional salary expense between 1985 and 1992, endless disputes about who is comparable to whom, and lingering un certainty if the city is even in compliance with the law at all. In his authoritative 1993 book, Incompa rable Worth, University of Virginia econo mist Steven E. Rhoads showed that after depressing the wages of computer special ists and nurses in order to achieve "pay equity," Minnesota localities can't find peo ple willing to take those jobs. Women, according to Rhoads' findings, are not clear winners when labor markets are distorted and wages are set by politics and politicians.

The last thing this country or any of its states need is another expensive mandate that substitutes the judgment of bureaucrats for that of the marketplace. Comparable worth-a silly and artificial invasion of free association between participants in the labor marketis incomparablyworthless. D THEFREEMAN IDEASON UBERTY The Prejudice Against Midnight Dishwashing by Ralph R. Reiland C hild Labor Regulation No.3 mandates that 14-and 15-year-oldkids can't work more than three hours on school nights. As a restaurant owner I can;be fined up to $10,000 per incident if a IS-year-old works an extra half hour on a busy night. These same teenagers, however, are per mitted to participate on school nights in Midnight Basketball leagues, funded in the 1994 crime bill. Once again the private sector has been double-teamed by prejudice and erroneous economic reasoning. It's assumed that everyone involved with Midnight Basketball is compassionate and well-meaning, and that a program that keeps kids busy and out of trouble at night is worth millions of tax dollars. But a different as sumption applies to a restaurateur who keeps the same 15-year-old busy till mid night cutting vegetables for soup. He's seen as some kind of slave driver-a capitalist robber barron who exploits neighborhood youth for profits.