Capitalism Is Good for Workplace Gender Equality (and Vice Versa)


Mad Men/AMC

Quartz's Noah Smith looks at how Gary Becker, the Chicago School economist who died last weekend, viewed workplace discrimination. Becker argued that the free market was good for gender equality and that deregulation would truly spur women and minority gains in the workplace.

From Quartz:

One trade-off Becker thought a lot about was workplace discrimination. Suppose that managers and executives are racist or sexist—for whatever reason, they just don't want to hire women and minorities, or to pay them what they're worth (pretty realistic, if you ask me). But this discrimination doesn't come without a cost. If one company pays women and minorities less than they produce, they could jump ship. With a highly productive and relatively cheap workforce of women and minorities, a fair-minded company could out-compete a discriminatory company and drive it out of business.

Unless, of course, it can't. Becker theorized that regulation and other government protections can shield discriminatory companies against attack. That would protect the jobs of the people who worked at those old-line companies, but would perpetuate workplace unfairness in the process.

Regulation, Becker argued, propped up discriminatory companies that would otherwise suffer in a more open and competitive marketplace. "According to Becker's famous theory on discrimination," wrote economics professors Andrea Weber and Christine Zulehner in a recent Journal of the European Economic Association article, "entrepreneurs with a strong prejudice against female workers forgo profits by submitting to their tastes. In a competitive market their firms lack efficiency and are therefore forced to leave."

In a study of start-up firms, Weber and Zulehner found that "firms with strong preferences for discrimination, approximated by a low share of female employees relative to the industry average, have significantly shorter survival rates … We also find evidence for employer learning as highly discriminatory start-up firms that manage to survive submit to market powers and increase their female workforce over time."  

At Quartz, Smith points out that it wasn't until the early 1980s that women really started to close workplace gender gaps, despite the fact that female labor force participation had been rising since the '40s. The gender wage gap barely budged between the 1950s and the early '80s, with women making about 60 percent of what men made. But between 1980 and 1994, women's earnings rose from this 60 percent to about 74 percent of what men made. According to economists June O'Neill and Solomon Polachek, the 1980s closing of the gender wage gap could be seen at virtually all ages, education levels, and work experience levels.

"We should never discount the importance of the feminist movement, which at the very least prepared society to accept rapid changes in gender roles," Smith writes. But neither should we ignore the contributions of capitalism. 

What happened in the early '80s? Laws mandating "equal pay for equal work" had been around since the early 1960s, but the gap hadn't budged. The feminist movement had been shifting cultural norms for decades, but why should it suddenly score big economic breakthroughs in the relatively conservative 1980s after years of frustration?

One explanation for women's sudden success is that Becker was right. The early '80s saw a wave of deregulation, and the start of a steady increase in trade as a percent of GDP. It also saw the advent of new forms of finance, designed to take power out of the hands of managers and put it in the hands of shareholders.

[…]  if Becker was right, then the unrestrained capitalism unleashed in the 1980s had another unexpected benefit—increased gender equality.

Smith notes that countries such as Japan that have avoided deregulation, shareholder capitalism, and open markets tend to lag in both productivity and workplace gender equality. "When it comes to gender equality in the workplace, Japan scrapes the bottom of the barrel," he writes. 

Just as minimally restrained capitalism can be good for workplace gender equality, workplace gender equality can be good for the economy. Earlier this week, Goldman Sachs Group released a report saying that Japan's economic output would soar if more women participated in the labor market. "Japan can no longer afford not to leverage half its population," the "Womenomics 4.0" report stated.

Closing the gender employment gap could boost the country's gross domestic product by 13 percent, according to Goldman Sachs Chief Japan Strategist Kathy Matsui and her team of analysts. But implementing this change can't done through regulation, they said. Instead the report suggests approaches such as deregulating Japan's daycare and the nursing care industries, reforming immigration laws, making tax and social security regulations gender neutral, encouraging the private sector to embrace flexible work arrangements, and working on campaigns to dispel gender myths in Japanese society in general.  

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  1. Its impossible to quantify, of course, because nobody will admit to it, but I firmly believe that anti-discrimination laws suppress hiring of minorities and women. Those laws make protected classes into walking lawsuits. Why would you hire a walking lawsuit when you have a perfectly adequate candidate who doesn’t pose those risks?

    1. Well they did quantify it for the disabled and we find that a higher percentage of the disabled are unemployed today than there were before it became illegal to discriminate against them.

      Is there any reason to think the effect for any other protected class would be different? Maybe not as pronounced since the disabled cause a whole slew of potentially expensive accomodations to be required that other protected classes do not but it should have the same effect as employers become more concerned with avoiding litigation than just hiring the best worker for the job

      1. Can I just chime in as a disabled libertarian about how much I truly despise those disability protection laws. I’m a model cripple for what’s going to be my line of work (limp that prevents running but not walking, and I’m about to graduate with an engineering degree

        1. not exactly heaving on the running), but every interview I go on its always floating in the back of their heads that I’m a potential liability. It just pisses me off how the idiot who passed this law have fucked me over just so they could feel smug and superior about it. Screw metrics to make sure the law works “We tried to help you. Who care what it actually did to your job prospects. Be grateful for your betters peon.”

          Edit: Apparently arrows end your comments. Who knew.

    2. I can give you anecdotal evidence for this. At a prior job, I had announced I was leaving and they wanted me to interview a replacement. My choice for the best candidate was a woman, and I put her forward to them. During talking to my manager, who had sort of already offered her the job, she gave him notice that she was pregnant. When he told the autocratic asshole brothers who owned the company, they went apeshit. They were prepared to do anything they had to, including bringing in the lawyers, to not hire her because they didn’t want to hire a walking potential lawsuit/miss 6 months of work employee. She was cool, though, and just decided not to take it, thereby freeing them from danger.

      I was then informed that no more women would be considered for the job, period. End of story.

  2. dergulating

    Someone needs to define this. I get what it’s supposed to be, but it’s too good of a word for it not actually be one.

    1. Naturally, I included a grammar error in my post about a typo.

      1. joe’z law strikes again.

      2. Dergulating: Committing the very error you are correcting.

  3. But between 1980 and 1994, women’s earnings rose from this 60 percent to about 74 percent of what men made

    And it was all because of 9 to 5. Thank you Dolly Parton!

    1. So if women do the same work as men for 74% of the wages, why does anyone hire men?

      1. Why are you asking me, asshole?

        1. Because he thinks you are Dolly Parton?

          1. Is Episiarch Dolly Parton? Is Dolly Parton an anarchist?

  4. In a study of start-up firms, Weber and Zulehner found that “firms with strong preferences for discrimination, approximated by a low share of female employees relative to the industry average, have significantly shorter survival rates

    “Well, that is because they pay men more than women! We must do something!” – Proggie

    “But wasn’t your goal the end of discrimination and increase in equality? The study shows that The Market is really leveling the playing field.” – Economically-knowledgeable Libertarian

    “No, you’re wrong! What this study shows is that businessmen are willing to do anything to avoid hiring women!” – Proggie

    “Uh… What? You’re contradicting yourself now! The study just showed you that hiring only men to work for you, in most cases, is a bad business practice! If businesses that hire more women are more successful, then that means more opportunities for women, not less” – Economically-knowledgeable Libertarian

    “You think that because you just want businesses to pay women less!” – Proggie.

    “Am I talking to a wall? Or a coin-operated machine here? Helloooo!” – Economically-knowledgeable Libertarian

    Yes, you are talking to a wall.

  5. “But between 1980 and 1994, women’s earnings rose from this 60 percent to about 74 percent of what men made”

    Hey look, ENB is being an idiot again.

    Hey stupid bitch, HOW MUCH DID THEY WORK?

    Right, so what’s the point of that stupid fucking “statistic”.

    1. The pay gap is the lie that won’t stop.
      The 23-cent gender pay gap is simply the difference between the average earnings of all men and women working full-time. It does not account for differences in occupations, positions, education, job tenure, or hours worked per week. When all these relevant factors are taken into consideration, the wage gap narrows to about five cents. And no one knows if the five cents is a result of discrimination or some other subtle, hard-to-measure difference between male and female workers.
      Also, single, young women with no kids earn more than their male counterparts.

      /ripped from a Daily Beast article

      1. From the same article:

        the ten most remunerative majors compiled by the Georgetown University Center on Education and the Workforce. Men overwhelmingly outnumber women in all but one of them:

        1. Petroleum Engineering: 87% male
        2. Pharmacy Pharmaceutical Sciences and Administration: 48% male
        3. Mathematics and Computer Science: 67% male
        4. Aerospace Engineering: 88% male
        5. Chemical Engineering: 72% male
        6. Electrical Engineering: 89% male
        7. Naval Architecture and Marine Engineering: 97% male
        8. Mechanical Engineering: 90% male
        9. Metallurgical Engineering: 83% male
        10. Mining and Mineral Engineering: 90% male

        And here are the 10 least remunerative majors?where women prevail in nine out of ten:

        1. Counseling Psychology: 74% female
        2. Early Childhood Education: 97% female
        3. Theology and Religious Vocations: 34% female
        4. Human Services and Community Organization: 81% female
        5. Social Work: 88% female
        6. Drama and Theater Arts: 60% female
        7. Studio Arts: 66% female
        8. Communication Disorders Sciences and Services: 94% female
        9. Visual and Performing Arts: 77% female
        10. Health and Medical Preparatory Programs: 55% female

        Much of the wage gap can be explained away by simply taking account of college majors.

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