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Thursday, June 25, 2009

Short Takes: On The Pay Gap & Passing Open Windows.

Feminists often cite the disparity of earnings between men and women as evidence of sexism. It occurred to me that one might (and I say might because I don't know the answer) find that the pay gap reflects a conservative life strategy rather than actual discrimination.

Huh?

Consider a business with two employees, Jack and Jill. Jack and Jill do the same work, but Jack makes 25% more than Jill.

Sexism! Horrid, Evil Sexism! Bad Jack! Bad Business! Poor helpless Jill.

This is the implicit conclusion - right? Jill has to be sort of helpless because we are assuming that Jill has marched into the boss's office, made a solid case for a pay increase and has been denied. Maybe Jill broke both her legs in a skiing accident, for example and has trouble marching anywhere. Another possibility is that Jill is just stupid.

Or, maybe Jill is not so stupid after all.

What happens when the economy heads south and the business is forced to cut costs? Mr. Business Owner looks at Jack and Jill and thinks, "Hmm... I get the same amount of work out of both, but Jack costs me 25% more."

Who do you think gets the pink slip? If we assume that Mr. Business owner is one of those evil types who is in business to make a profit, then we can conclude that it is Jack who is shown the door.

That means that Jack's pay is now a big goose egg, but Jill still collects a salary and is able to pay her mortgage and phone bill and occasionally splurge on a gorgeous pair of shoes.

Suddenly, Jill doesn't look so dumb anymore, eh?

Some weirdos might even describe the situation as follows: Jill, who is risk averse, pursues a life strategy that is in line with what she considers to be an acceptable level of risk and reward. Kind of like an investor who chooses to place their money in low risk money market funds instead of the fancy new double-whammy-high-yield-subprime-mortgage-credit-default-swap-with-a-cherry-on-top fund.

That investor knows that the return on their safe money market fund will look rather skimpy when compared to the cherry-on-top fund when it is doing well. The investor also knows that it is far more likely that he or she will still be earning a positive rate of return on their money when the cherry-on-top fund has gone into a tail-spin and its investors are jumping out of windows.

Maybe, Jill just doesn't want to jump out of a window!


RH


PS: Passing open windows is a reference to
The Hotel New Hampshire
, a very funny book by John Irving.

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