Some economics of the marriage bars (and mandatory retirement ages)

Up until 1966, women had to quit from the Australian Public Service when they married! The bar was repealed in 1966 with a private members bill by Bill Hayden.

Some hid their marriages for years, hiding their rings before they got to work.

One woman remained unmarried and bore four children. She managed this by timing her annual leave to cover the births.

While her personnel area was co-operative, they forced her to resign her middle management position when she decided to make an honest man of her de facto husband by marrying the father of their children.

Claudia Goldin found that marriage bars were policies adopted by firms and local school boards, from about the early 1900’s to 1950. They fired single women when they married and would not not to hire married women.

The marriage bar, which had at its height affected 751 of all local school boards in the USA and more than 50% of all office workers, was virtually abandoned in the 1950’s when the cost of limiting labour supply greatly increased.

When marriage bars disappeared, Goldin found that older female workers in the mid-1950’s were suddenly praised for their “maturity, reliability, neat appearance, and less chatty nature”.

In retail trades, and especially in suburban retail shops, Goldin found that older married women with absolutely no previous training were now the “ideal employee”; the middle-class woman were “naturally courteous” and “well-bred,” and who did not have to work became the preferred recruits of the major department stores. the best female employee was, in the words of a Sears, Roebuck, and Co. officer

a married woman with a mortgage on her house and her children partially raised

These sudden changes in the attitude of employers towards the recruitment of women of different ages and marital status suggests that the previous personnel policies were disciplined by competition.

Marriage bars, in the private sector, were instituted by large firms with centralised hiring promotion and salary schedules that were often fixed and based on tenure with the firm, and other modern employment practices.

This evidence suggested to Claudia Goldin that firms may have wanted to encourage turnover when earnings rose more rapidly with tenure than productivity. These  employers in firms with rigid wage systems, tied to their workers’ seniority, desired a young, inexperienced work force. Goldin hypothesise that the marriage bar was a socially acceptable way of terminating the employment of young women whose wages would eventually rise to exceed their addition revenue to the firm.

Goldin suggested that the marriage bar had some relationship to seniority pay, as discussed by Edward Lazear.

Under seniority pay, and employees paid less than their productivity in their early years of employment but more in their later years of employment up to say a retirement date.

By back loading salary, the employer could economise on the cost of monitoring the employee’s performance and especially so in jobs where it was hard to evaluate performance. Because of the prize at the end of the road: a large salary paid towards the end of a career, an employee had more reasons to be honest and not to underperform and risk dismissal.

Not all workers may be compensated under long-term seniority pay contracts. Routine office workers, support staff, sales agents, and so on appear to be compensated on a spot basis rather than under long-term incentive contracts.

Workers in these more routine occupations have lower monitoring costs. Their productivity can be more easily and cheaply  measure directly.

There is no need for sophisticated incentive contracts as is the case more often with managerial Employees and workers who hold positions of trust. In both cases , the back loading a salary operates as a bond against poor performance and dishonesty.

Most women entered the workforce by the age of 18 in the mid to early 20th century. They married in their early to mid-20s. This meant that the maximum length of their career with the firm would be 5 to 7, maybe 10 years.

Because these women are often assigned to low skilled clerical duties where there are a few promotion prospects, the productivity of these women did not increase much with time in the job.

To make sure that some women didn’t stay on to receive the seniority based salary increases by not marrying, Goldin found that some firms offered a substantial dowry is to women when they married if that already been with the firm for six years.

These dowries were buying women out of jobs where their wages were rising, but their productivity was stable.

Another advantage of buying women out of their jobs when they married was that the male co-workers didn’t have to be paid a wage premium for less job security can as they themselves could be dismissed on similar grounds.

Marriage bars were found by Goldin to be associated with fixed salary scales, internal promotion, and other personnel practices and they are not associated with piece-rate work.

Subsequent work on mandatory retirement ages in the public private sector found a similar link to both seniority pay and organisational architecture and the the limits of individual managerial discretion over firing.

The organisational architecture of a firm encompasses the assignment of decision rights within the firm, the methods of rewarding individual employees, and the structure of the systems that evaluate the performance of individual employees and business units.

Some larger firms may struggle to administer internal corporate governance structures which permit more local managerial discretion over employment relationship matters and still properly control the costs of a more diverse workforce.

A price of growth in the size of a firm is often the standardisation of products, workforce compositions and terms of employment.

When mandatory retirement was lawful, large firms with centralised personnel structures are more often to be found to have mandatory retirement ages.

The nub of the problem is large firms have several layers of management with fairly strict limits on what each individual line manager can do (Williamson 1975, 1985; Fama and Jensen 1983b).

There must be limits on local managerial discretion because the owners and senior managers set the strategic direction of the firm, the products it sells, and how many workers are employed and on what wages.

Larger firms may struggle with striking the most profitable balance between greater local managerial discretion and effective corporate governance of a large diverse organisation with professional managers and diffuse ownership structures. It will be shown that very large firms promulgate rigid personnel policies while smaller firms are much more flexible in their deals with individual employees.

This balance between local managerial discretion and central control must extend to wages and hours because labour costs make up much of the costs of many firms. Changes in policies on wages and conditions are subject to ratification and monitoring by head office and the corporate board in managerial firms.

This increasing rigid separation of decision management rights from decision control rights as a managerial firm grows will restrict flexibility in terms of employment, including phased retirements. Top level managers and board members both have limited amount of time to allocate, limited spans of control, and will have less and less detailed knowledge of their firm as it grows.

Limits on the degree of local managerial discretion over employment relations in large managerial firms can arise from restrictions on managerial delegations, divided decision making rights, hierarchical approval procedures, and the breath and content of wage and personnel policies. This can include not having a personnel policy on the availability of phased retirements. This gap can be through choice, inertia or attention to other concerns currently of a higher priority.

The discretion of supervisors in large firms over the terms and conditions of employment of individual members of their team may be limited to individual performance ratings (Gibbs and Hendricks 2004).

Smaller firms have more more discretion over retirement ages was is less of a separation of ownership and control, and owners are much more able to be on-site and of balance risks and rewards from innovations.

Good evidence to illustrate the proposition that larger firms prefer rigid rules over discretion in personnel policies comes from the days of mandatory retirement. Mandatory retirements can be viewed as the wholesale substitution of local managerial discretion with a single company-wide rule because larger firms find idiosyncratic decisions to be more costly (Parsons 1997).

Back when they were legal, mandatory retirements are near universal in very large workplaces, but in small to medium size firms, there were flexible retirement polices. Few very large firms reported flexible retirement polices. The smaller firms provided for policies that allowed for exceptions to mandatory retirement rules while most of largest firm reported a policy of zero exceptions to mandatory retirement rules (Parsons 1997).

The line managers in small firms were more willing to allow an older worker to work passed the usual retirement age because they had more delegations with regard to terms and conditions of employment. In addition, in smaller firms, the owners are more likely to be among the management team for the CEO and able to closely supervise the success of the discretionary decisions of junior management over conditions of employment and hiring and firing.

Some economics of immigration and other forms of labour force and population growth

One of my puzzles about immigration is the claim that they take jobs from natives. This is the lump of labour fallacy: that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs.

Immigration is population growth. The other method of population growth is natives of the country having children and these children growing up to enter the workforce.

labour2

No one complains about new work force entrants taking the jobs of existing workers. Somehow, no matter how fast or how slow the population may be, jobs are always available.

The baby boom may have slightly increased the natural unemployment rate simply because there were more young people entering the workforce for the first time and job shopping.

This job shopping is when newcomers to the workforce move around a lot more as they find the specific jobs, employers, occupations and industries that suit their talents and inclinations. After about 10 to 15 years of job shopping, the majority workers settle down into a particular job and occupation for a long time.

Labour supply increases through teenagers entering the workforce and migrants entering the workforce differ only in respect of the local taxpayer didn’t have to pay for their schooling.

labour

All through human history, the labour market has been able to cope with population increases with very little drama.

The large increase in female labour force participation since the mid-20th century was handled with ease despite the predictions of the odd, angry misogynist.

Indeed, is there any difference between the arguments against more immigration and the arguments in the mid-20th century against more married women working? Both are about taking jobs are of of existing workers, who will then be thrown on the scrapheap of society and never find another job.

This massive increase in female labour force participation is a good example of how labour force surges can be handled with ease by the labour market, be they domestic in origin or through immigration. The labour market was able to absorb millions of additional married women re-entering or staying on in the workforce to work full-time.

There is more to full employment than employment

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