The pay equity settlement is unfair to fair employers

My objection to the $2 billion pay equity settlement is an employer can live a morally upright life, hiring on merit, paying the most he can while still staying in business, and still be successfully sued. Their good names are blackened forever.

The court case and the pay equity bill before Parliament are not about anything the retirement home employers did wrong. They paid the going rate. The case was about what was paid in other industries based on the contentious concept of comparable worth.

The notion that the same job should not pay different rates because of sex is a question on which all agree. Comparing pay in a job to jobs in other industries because more men work in them requires many leaps in reasoning that is less to do with justice and is more about ideology and economics.

The most obvious of which is the extent to which you accept the market setting wages. That is a different dispute to someone being paid a different pay in the same job because of their sex.

Employers hiring on merit is a basic practice of any business who wants to survive in competition. Not hiring the best regardless of sex and race sacrifices profit for bigotry.

Anyone suggesting that the immorality of the market is open and shut was watching the other channel when the Berlin Wall fell and extreme poverty dropped by two thirds in China, India and elsewhere since 1990. The market has at least an arguable case as an acceptable way to set wages.

Many tweet their moral contempt for the market on a smart phone that would have cost many millions of dollars to make when the Berlin Wall fell, and they would not give up the Internet for life in return for $1 million. Are we all millionaires just because of the digital economy?

Adam Smith wrote that matters of distributive justice can only be resolved if people distance themselves from the grubby particulars of their own positions in particular disputes. This evolved into John Rawls arguing that the justice of social institutions should be tested from behind a veil of ignorance where people don’t know their particular place in society or their individual talents.

Rawls argued that a society is fair if you would not mind turning up anywhere in it at random. Inequality is OK if the poor are looked after better than in a more equal society. It is better to be poor in a rich society than poor in a poor society. Rich societies can afford generous welfare states.

Behind Rawls’s veil of ignorance, most would easily agree on equal liberty, equal opportunity and all jobs to be filled on merit. Would agreement on having a market economy be just as quick?

Strong competitive markets do not favour one individual over another. They harness self-interest to generate massive wealth, widely distributed. The income of the poorest, along with the whole of society, benefit from competition in a market economy. Behind the veil of ignorance, not knowing where we will turn up at random in a society, rational people would support competitive markets.

The market delivered the Industrial Revolution. Yesterday, today and every day, 200,000 plus people escape extreme poverty in developing countries because of the spread of capitalism. Yes, this involved inequality and markets determining wages but living standards increased 30-fold since the dawn of the Industrial Revolution; life expectancy doubled since 1900.

OK, you do not have the luxurious life of billionaires, seven of the top eight were self-made I might add. Oddly enough, you probably enjoy a better life than John D. Rockefeller did 100 years ago. Rockefeller lived in a big draughty house with lots of servants. Cars were primitive as was medicine. No refrigerators, washing machines or other domestic appliances we take for granted. Running water, much less safe tap water were brand new inventions at best.

The living wage in New Zealand is set high enough to afford mobile phones, the Internet, overseas holidays and Sky TV too. All beyond the reach of Rockefeller despite his billions.

Would you step into a time machine to go back to the good old days of the 1970s before Rogernomics? You must leave everything from your iPhone to cheap international travel at the door, knock a few years off your life expectancy, and watch two TV channels with no VCR. How many remember what a VCR is? I would pack a few recently invented medicines to ever contemplate stepping back in time to the good old days before neoliberalism no matter how much money was waiting for me at the other end.

Even the biggest critics of neoliberal New Zealand only go so far as to claim that the good old days of the 1970s was an egalitarian paradise except if you were female, Maori or gay. That is two-thirds of the population! The good old days were a very boy’s own good old days.

The road to a more just society is still full of trade-offs. We should have a hard head as well as a soft heart. The case for the pay equity settlement and against the market setting wages is not open and shut.

If I was to spend $2 billion more in the health sector, distributive justice would mind me to spend it on Pharmac and hospital waiting lists. Mental health workers want a flow on of the pay equity settlement. I would spend that money on hiring more mental health workers, not paying the existing ones more.


.@XTOTL claim that women & Maori being screwed by neoliberalism since 1984

Toby Morris claimed in an inequality graphic on in 2015 that subsequent to the 1980s economic reforms, the rich got the income of the rich double while the incomes of the majority of New Zealanders was largely static. He then claimed that

in short, regular Kiwis were screwed, especially women, Maori and Pacific Island communities

Figure 1 shows that real household incomes increased pretty much evenly across all 10 income deciles between 1994 and 2013, ranging between 40 to 50%.

Figure 1: Real household incomes (BHC), changes for top of income deciles, 1994 to 2013

Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014).

The figure below shows that since the end of the recession in the early 1990s, there has been rapid income growth including from Maori and Pacifika, at least 50%, if not 70%.

Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2016. Ministry of Social Development (2017).

The massive improvements in Māori incomes since 1992 were based on rising Māori employment rates, fewer Māori on benefits, more Māori moving into higher paying jobs, and greater Māori educational attainment. Māori unemployment reached a 20-year low of 8 per cent from 2005 to 2008.

New Zealand has the smallest gender wage gap of any country; 60% of university graduates are now women.






Gary Becker (1991) on the power of culture and traditional women’s roles


Source: The Adam Smith address: Education, labor force quality, and the economy. By: Becker, Gary S., Business Economics, Jan1992, Vol. 27, Issue 1

Why is the Swedish gender wage gap so stubbornly stable (and high)?

The Swedes are supposed to be in a left-wing utopia. Welfare state, ample childcare and long maternity leave but their gender wage gap is almost as bad as in 1980. They must be a misogynist throwback.

swedish gender wage gap by percentile

Maybe Megan McArdle can explain:

There are countries where more women work than they do here, because of all the mandated leave policies and subsidized childcare — but the U.S. puts more women into management than a place like Sweden, where women work mostly for the government, while the private sector is majority-male.

A Scandinavian acquaintance describes the Nordic policy as paying women to leave the home so they can take care of other peoples’ aged parents and children. This description is not entirely fair, but it’s not entirely unfair, either; a lot of the government jobs involve coordinating social services that women used to provide as homemakers.

The Swedes pay women not to pursue careers. The subsidies from government from mixing motherhood  and work are high. Albrecht et al., (2003) hypothesized that the generous parental leave a major in the glass ceiling in Sweden based on statistical discrimination:

Employers understand that the Swedish parental leave system gives women a strong incentive to participate in the labour force but also encourages them to take long periods of parental leave and to be less flexible with respect to hours once they return to work. Extended absence and lack of flexibility are particularly costly for employers when employees hold top jobs. Employers therefore place relatively few women in fast-track career positions.

Women, even those who would otherwise be strongly career-oriented, understand that their promotion possibilities are limited by employer beliefs and respond rationally by opting for more family-friendly career paths and by fully utilizing their parental leave benefits. The equilibrium is thus one of self-confirming beliefs.

Women may “choose” family-friendly jobs, but choice reflects both preferences and constraints. Our argument is that what is different about Sweden (and the other Scandinavian countries) is the constraints that women face and that these constraints – in the form of employer expectations – are driven in part by the generosity of the parental leave system

Most countries have less generous family subsidies so Claudia Goldin’s usual explanation applies to their falling gender wage gaps

Quite simply the gap exists because hours of work in many occupations are worth more when given at particular moments and when the hours are more continuous. That is, in many occupations earnings have a nonlinear relationship with respect to hours. A flexible schedule comes at a high price, particularly in the corporate, finance and legal worlds.

Gender pay gap shown to be a myth by @paulabennettmp @women_nz

The Minister for Women Paula Bennett and the Ministry of Women published excellent research in February showing there cannot be a gender wage gap driven by unconscious bias. The Minister has blamed a large part of the remaining gender wage gap on unconscious bias.

… up to 84 per cent of the reason for the Pay Gap, that’s right, 84 per cent, is described as ‘unexplained factors.’ That means its bias against women, both conscious and unconscious.

It’s about the attitudes and assumptions of women in the workplace, it’s about employing people who we think will fit in – and when you have a workforce of men, particularly in senior roles then it seems likely you’re going to stick with the status quo – whether they do that intentionally or just because “like attracts like”.

It’s because there is still a belief that women will accept less pay than men – they don’t know their worth and aren’t as good at negotiating.

The reason why this February 2017 research on the motherhood penalty contradicts earlier Ministry of Women research on unconscious bias and the gender wage gap is simple.

There is a large difference in the gender wage gap from mothers and for other women. As the adjacent graphic from Ministry of Women research shows, the gender wage gap for mothers is 17% but it is only 5% from other women.

Source: Effect of motherhood on pay – summary of results Statistics New Zealand and Ministry of Women February 2017.

We men, us dirty dogs all, have no way of knowing whether a female applicant is a mother. Remember we are dealing with unconscious bias, the raised eyebrow, the prolonged pause, the lingering glance, not a conspiracy or a prejudice of which we are self-aware and take overt steps to implement. Unconscious bias is unconscious by definition.

Because the bias against women is implicit and unconscious, we men, dirty dogs all, do not know we are biased, so we do not know we have to make further enquiries to check if the female applicant is a mother so we can discriminate against her more than we do for other women.That is before we consider other drivers of the gender wage gap such as whether there are relatively large spaces between the births of her children. 

Large spaces between the birthdays of children greatly increases the gender wage gap because women spend much more time out of the workforce and part-time if they spread births. This reduces their accumulation of on-the-job human capital and encourages women who plan large families to choose occupations and educational majors that do not depreciate rapidly during career interruptions.

I have no idea how an unconsciously biased employer can discover  if a woman has children with spaced out ages and therefore discriminate against an even more, unconsciously, of course. We men, dirty dogs all, do not know that in order to discriminate against them, especially in shortlisting for initial hiring when we have no information beyond the application about them.

Do women have more unconscious bias against women than men? If not, there should be differences in the gender pay gap in firms with more women managers or owners.

Perhaps there is more unconscious biased in promotions because managers may have accidentally learnt are the ages of the children of  female applicants and unconsciously taken a note to remember that when unconsciously discriminating against them in promotion. This unconscious bias involves a lot of very conscious data collection and retention.

All in all, the unconscious bias hypothesis simply cannot explain such a large difference between the gender wage gaps of parents and non-parents. There is too much evidence whose existence that is strictly forbidden by the hypothesis of unconscious bias against women in the workplace.

But @NZLabour must be guilty of racism if it uses its own evidence standards

Prominent New Zealand Labour Party stalwart Sunny Kaushal has resigned from the Party amidst allegations of hostilities and bullying from Party Membership and Party Hierarchy.

With the growing use of arguments about unconscious bias, it is near impossible to rebut an accusation of racism.

Certainly, once the accusation is spit at you, the onus is on you to prove to a stranger who never met you before beyond reasonable doubt that you are not a racist. One misfortunate glance, a raised eyebrow, a jumbled sentence is enough to undo a life of principle

Unconscious bias is the main driver of the gender wage gap if my betters are to be believed. Why not racism? What is the view of the New Zealand Labour Party on unconscious bias in proving racial discrimination and pay inequity?

The Labour Party wants to reverse the onus of proof in sexual assault trials. Certainly these standards should filter down into civil proceedings and pub conversations.

The Labour Party must be a cauldron of sexism if the only way it can get gender balance in caucus is quotas. Why is racism not any less insidious within Labour decision-making than sexism?