Cato Policy Analysis No. 38 May 31, 1984

Policy Analysis

Value and Opportunity:
The Issue of Comparable Pay for Comparable Worth

by Deborah Walker

Deborah Walker is a research fellow at the Center for the Study of Market Processes at George Mason University.

Executive Summary

There are few, if any, men who would qualify for the position of Playboy bunny, and there are few, if any, women who would qualify for the position of male lead in a motion picture. However, there are many other occupations in which gender may be irrelevant. People in these jobs include nurses, truck drivers, lawyers, secretaries, and economists. Why is it, then, that these jobs are each characterized by a disproportionate number of males or females? And why do many female-dominated occupations command lower wages than do male-dominated occupations?

During the past two decades, many feminists have answered these questions with one word: discrimination. They have felt that the only appropriate means for bringing about change and equality for women in the work force has been government regulation. The 1960s were characterized by one law after another, each seen as a step toward bettering women's position in the labor force. In 1963, for example, Congress passed the Equal Pay Act, requiring equal pay for the same work. Title VII of the Civil Rights Act, passed in 1964, prohibited employers from discriminating against women.

Feminists in the 1980s, though, are stating that these regulations have not been effective because women on average still earn approximately 59 percent as much as men do, and are largely concentrated in certain types of jobs. Members of the Business and Professional Women's Foundation blame this "lack of progress" on poor enforcement of the regulations and on "the imprecise language of the Equal Pay Act." The organization also claims that e "Segregation of 'men's jobs' and 'women's jobs' has been a barrier to successful litigation and bargaining for equal pay for women. Because the jobs of both sexes are not identical, it has been difficult to demonstrate the discriminatory basis of women's wages."[1]

To deal with this, many feminists are focusing on what Janet Gray Hayes, former mayor of San Jose, California, calls the "issue of the 80s"--equal pay for work of comparable worth. The concept of comparable worth differs from that of equal pay for equal work not only in definition but also in how it would affect women if it were passed into law. Equal pay for equal work deals with paying a woman the same wage as a man, or another woman, who is doing exactly the same job. Comparable worth focuses on paying an entire profession or occupation the same wage rate as a second profession or occupation, both of which are determined by some outside authority to be of the same worth or value to an employer.

The proposed method of determining this worth or value of a job is a job-evaluation point system. Under such a system a certain number of points are awarded for different job criteria, such as skill, effort, and responsibility required by the job, as well as working conditions under which the job is performed. Those jobs with the same number of points are determined to be of equal worth.

Advocates of the point-system method, therefore, claim that each job has an intrinsic value to an employer and that it is possible to objectively determine this value.- In a recent court decision, the American Federation of State, County and Municipal Employees (AFSCME) won a major lawsuit against the state of Washington. Using a point system similar to the one described above, AFSCME introduced evidence that positions such as that of clerk-typists should be paid the same wage rate as that of warehouse workers. Judge Jack Tanner ruled that wages in "female occupations" be increased, not that wages in "male occupations" be lowered.

In other court cases nurses employed by the city of Denver have argued that they should be paid as much as city tree-trimmers,[2] and jail matrons in Oregon have argued that they should be paid the same wage as male guards.[3] The nurses and jail matrons--like the AFSCME typists--relied on the argument that their jobs are automatically valued lower than male-dominated jobs simply because they are female-dominated jobs. Their argument implies, therefore, that if the occupations of clerk-typist, nurse, and jail matron were predominantly male, the wages for these occupations would be higher.

A recent report prepared for the Equal Employment Opportunity Commission (EEOC) by the Committee on Occupational Classification and Analysis concludes that our judgment is that there is substantial discrimination in pay. Specific instances of discrimination are neither easily identified nor easily remedied, because the widespread concentration of women and minorities into low-paying jobs makes it difficult to distinguish discriminatory from nondiscriminatory components of compensation. One approach, which needs further development but shows some promise, is to use existing job evaluation plans as a standard for comparing the relative worth of jobs.[4]

Do jobs really have an intrinsic value irrespective of the market that can be determined by using job-evaluation systems? One useful way to examine this question is to consider exactly how the value of a job (or a wage) is determined.

When a person values something more than he values something else, he is simply stating a preference for A over B. (I am aware of the possible sexist connotations carried by "he," "his," and "him," but I prefer this simplified use of English to the cumbersome "he and she," "his and hers," etc.) An employer values the labor of his employee more than he values the wage he pays. The employee, on the other hand, values the wage more than he values his time and effort. If this were not the case, trade between the employer and employee would not take place. When trade does take place, both people feel they are better off; they have traded something of less value for something of greater value. Each of them has subjectively determined that the trade was worthwhile at that particular time and under those particular circumstances.

How do the employer and employee determine their respective values? Values are always determined in the individual, unique minds of men and women. A person will value one thing over another because he feels it gives him greater utility--that is, satisfaction or usefulness. This satisfaction or usefulness may not seem right or appropriate in the eyes of another person. Right or wrong, though, one's notion of value guides one's actions and determines one's goals. These goals may change as a person changes his value of something.

Things and people do have intrinsic characteristics, but even these are viewed and valued differently by different people. Objectively, for example, a painting by Picasso is just a piece of canvas with paint on it. Subjectively, however, this same canvas may be viewed and valued as a great work of art. It is important to remember that values are always determined subjectively.

Do jobs, then, really have an intrinsic (objective) value? Or can the value of any job only be determined subjectively, depending on the circumstances? Given that the value of a job can change at any time and differs from person to person, jobs have subjective characteristics.

Consider the situation of a man stranded on a deserted island. The day before he was stranded, his circumstances and ideas may have led him to value the services of a tailor very highly. However, once he is stranded, he no longer cares if his clothes fit well. He may now be willing to trade the services of fifty tailors for those of one boat builder. As a consumer, the man stranded on the island has determined the value he places on the services of a boat builder, as well as his value of any person the boat builder might employ.

As entrepreneurs become alert to the changing values of consumers, they will shift their factors of production--labor, capital, land--to best satisfy these consumers. Therefore, those factors most valued by consumers will also by valued highly by the entrepreneurs. If, for example, a great number of sailboats were suddenly demanded (valued), the boat builder's employees who are trained in making sails would become more valuable to consumers--and to the employer--and they would command higher wages. Employers, therefore, cannot simply set rates at whatever level they desire. Rather they must be constantly alert to the changing values of consumers.

However, not only do wage differentials between jobs reflect the values consumers place on the contributions workers make to the final product but they also depend upon the scarcity of qualified workers relative to the demand for their contributions. Employees who have skills, experience, abilities, and contributions needed by an entrepreneur and who are also scarce relative to demand will be paid higher wages.

Wage differentials between men and women are not the consequence of women being inherently less productive than men. The differentials exist because women, in comparison, generally have less education and fewer skills and are higher risks for employers. For example, those women who entered the work force in the 1950s were generally more educated then their male counterparts. Since then, however, as more and more women have entered the work force, the average level of education for working women has fallen behind the average level for men.[5]

Men do not leave their jobs to have children and are less likely than women to leave their jobs to care for their children. In addition, men are less likely to move if their spouses are forced to relocate for professional purposes. All of these are reasons why turnover rates for men are lower than turnover rates for women. One study using Department of Labor reports estimates that the median number of years men stay on their jobs exceeds that for women by 77-100 percent.[6]

Differences in wages between men and women can also be explained by other factors. Men are usually physically stronger than women and they tend to work in jobs that have a higher probability of physical harm. Because of this increased risk to the employee, these jobs command higher wages. [7]

With a comparable-worth policy, what would happen if supply and demand conditions were to drive up the wages in one particular occupation? For example, with regard to the AFSCME v. State of Washington decision, if there is a sudden shortage (relative to demand) of warehouse workers in Washington, causing wages to increase at a greater-than-normal rate, should clerk-typists automatically receive the increased wage simply because their occupation is determined to be of comparable worth?

Through the use of prices, the competitive process enables market participants to learn about available opportunities. As consumers' tastes and preferences change, prices change to reflect the new choices the consumers are making. As the prices of consumer products change, wages in the labor market change. Workers, like entrepreneurs, are always at the mercy of consumers, and prices are the signals that tell all market participants how products, services, and ultimately workers are valued in the market.

Wage rates in turn provide information to people who are deciding on an occupation. An occupation demanding a high wage rate means that consumers value the job and that there is a small supply of workers relative to demand. The incentive to enter this occupation would be high. A comparable-worth policy would cause great distortions in this information. A high wage rate may simply mean that the occupation is determined to be of comparable worth to a different, high-paying occupation. People would then have incentives to enter and train for occupations where there is already an ample supply of workers. The result would be over-supply of workers in some occupations and under-supply in others.

One popular argument against permitting the forces of supply and demand to set wages is stated by EEOC consultant Ruth Blumrosen. She contends that prevailing wages are a product of other employers' prior discriminatory practices.[8] But entrepreneurs are concerned only with the present and the future. The value of something yesterday has no meaning to them today. They value the factors of production, including labor, available in the present in accordance with these factors' anticipated services in the future production of consumer goods. This is because entrepreneurs are always acting in the present to produce results in the future.

Some feminists also claim that many women should not be subject to changes in market supply and demand. The EEOC report explains that "while the opportunity to move out of segregated job categories may be welcome to many women, many others, who have invested considerable time in training for their jobs, demand wage adjustment in 'women's jobs' rather than opportunities to work in other jobs."[9]

In other words, many women feel employers should be forced to demand whatever skills, experience, or abilities these women may already have. This would be the same as forcing consumers to purchase products they do not want simply because these products are already on the market. If this were the case, entrepreneurs would have little incentive to create new, more innovative products; consumers would have to buy what the producers are already selling.

This is precisely the effect a comparable-worth policy would have upon women. They would no longer have the incentive to better themselves, to learn new skills that are actually in greater demand. With this lack of incentive, wage rates would be likely to decrease rather than rise. For example, the judge in the AFSCME v. State of Washington case ruled that wages in "female occupations" be increased. This decision is likely to increase the incentives of women to continue entering these "female occupations" and therefore create an oversupply in these jobs.

Many feminists, in effect, are saying to women, "Stay where you are.' This kind of advice, though, only reinforces the idea that women are unambitious and less capable than men. The very women who are trying to shed this image are actually demonstra- ting that they agree with it by arguing that women will "never get anywhere" without the help of government.

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