Monday, March 03, 2008

The Confused Female Wage Debate

After IF Metall, the biggest union within the Swedish central union LO, said it would not agree to coordinate wage demand with other LO unions in order to raise female wages relative to male wages, the feminists within LO went ballistic and attacked tacked IF Metall, despite the fact that IF Metall said it was in fact committed to raising relative female wages and that they just didn't think coordination with other LO unions was the right way to do it.

The feminist-dominated media showed their view of "fair and balanced" reporting by also interviewing more feminists to criticize IF Metall. What especially upsetted the feminists seem to be that IF Metall argued that one cause of lower female wages was that many typically female professions was less qualified, to which the feminists replied that they think that they are as qualified as the typically male professions.

Yet what is completely left out of this debate is the fact that wage levels have nothing to do with qualification of the tasks themselves, other than very indirectly, and is instead related to the marginal productivity of labor. Marginal productivity is itself determined by three factors: 1. How high demand is for the products of the company or organization they work for 2. How necessary that task is for producing the products of the organisation 3. How many people that are willing and able to do that job.

Point number one and two should be fairly obvious as an organization clearly can't pay more money than they have available, and as demand for a particular kind of job task is obviously related to how necessary it is and how many workers this requires. Point number three is perhaps not as immediately obvious, but think about it this way. If there are many people trying to get the same kind of jobs, then if a worker quitted, the employer probably wouldn't have to pay any more to get a replacement. If on the other hand there is a shortage of workers for that task then the employer would probably have to pay a lot more to get an equally qualified worker. The marginal productivity of a worker is thus a function of much the employer would have had to pay if that particular worker hadn't worked there.

Why then do women in general have lower marginal productivity? Well, simply because they choose to work in jobs with low marginal productivity, where there is a surplus of workers. Women themselves choose to work in these jobs. No one is preventing them from entering typically male professions. If they stopped applying for these jobs, then the employers would be forced to raise the wages of those jobs. The women who want to work in those jobs presumably apply to it because they like the job tasks or because they don't require much education. And that's a legitimate choice for someone with such preferences, but they should note that it is this preference which causes their lower pay.

And do note that this analysis do not simply apply to a pure market economy. It applies just as well to the typical mixed economy where the government subsidize certain sectors and try to get women to increase their formal labor market participation relative to men, by for example having high taxes on labor in general win order to finance subsidies to day care centers. The only thing this changes is which sectors will demand labor and the relative labor supply by men and women. Ironically, this feminist policy of taxing men and thereby reduce their labor supply and using that income to subsidize formal female labor supply is in fact a contributing cause of the wage gap the feminists are complaining about.


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