Economics

Better Shop Around

|

Better Shop Around

By Jacob Sullum

January 14, 1998

In the Middle Ages, Christian philosophers taught that the "just price" for a good or service was determined by the cost of producing it. They said charging more was sinful and should be illegal.

Nowadays, it's hard to find an economist who would agree. Given choice and competition, it's generally accepted that buyers and sellers should be free to determine prices: If you think the convenience store on the corner charges too much for Diet Coke, you can go somewhere else.

But the medieval doctrine of the just price is alive and well in New York, where the City Council recently approved an ordinance prohibiting businesses from charging men and women different prices for haircuts and dry cleaning. The city's Consumer Affairs Department can now impose $500 fines on hair salons and dry cleaners that set prices based on a customer's sex.

"It was an injustice, what was being done to women," explained Councilwoman Karen Koslowitz, one of the law's sponsors. City Council staffers documented this "injustice" in a 1996 survey of 199 hair salons and 67 dry cleaners. Nearly half of the salons charged women more than men for a basic cut; the average price for women was about $21, compared to about $15 for men. On average, women paid 14 percent more for dry cleaning.

Many salon owners and dry cleaners say there are sound business reasons for such disparities. Women tend to have longer hair, and their styles take more time. Women's clothing often has pleats, ruffles, lace, decorative buttons, or other doodads that require special care. Their shirts may be too small to fit old presses designed for men's clothing, so they have to be ironed by hand.

Nonsense, say critics of gender-based pricing. Even if these differences matter, they do not justify a broad policy of charging women more than men. What about the woman with short hair who wears men's shirts and is not particular about how she looks? Why should she pay more? Prices should be based on the factors that make the service more expensive to perform–hair length, time, type of clothing–rather than the customer's sex.

This all sounds quite sensible, and in fact the New York City ordinance, like a similar law that took effect in California a few years ago, allows hair salons and dry cleaners to charge different prices for different services. Clearly, however, many business owners believe a gender-based rule is easier to implement than more complicated, case-by-case distinctions, which would take more time and might invite disputes. They have implicitly decided that the advantages of a simple policy outweigh whatever business they might lose because women object to their prices. Are they right? Beats me. What do I know about cutting hair or dry cleaning? Unlike the New York City Council, I am not prepared to substitute my judgment for that of the people whose livelihoods are at stake. They don't tell me what to charge for writing articles, and I don't tell them what to charge for styling hair or cleaning clothes.

But one thing is clear from the fact that these places stay in business: A lot of women are willing to pay higher prices. In trying to show how irrational gender-based pricing is, critics often note that many businesses–apparently including most of the hair salons in New York City–don't charge women more. Yet women continue to patronize the businesses that do. They may grumble, but they don't shop around.

When California's ban on gender-based pricing took effect in 1996, The Orange County Register ran a story that opened with an anecdote about a woman who "took her family's clothes to the same Anaheim dry cleaner for more than two years before stumbling on an outrage. Her oxford shirt, virtually identical to one worn by her husband, cost nearly twice as much to clean." The example, presumably meant to illustrate the need for legislation, was undermined by the woman's response: She "took her business elsewhere."

The attempt to force the same pricing policy on all hair salons and dry cleaners is not only unjustified meddling with people's businesses. It's also a form of sexist paternalism, suggesting that women are incompetent consumers who can't be trusted to judge their own interests and decide what prices they're prepared to pay. I guess medieval ideas really are back in style.