Eternal Wage Gaps

Mandatory equality failure

Equal pay for equal work seems only fair. So when governments encounter a difference in the average wages of men and women, they often assume invidious discrimination. In 1988, Ontario passed the most comprehensive pay equity legislation in the world, requiring employers to proactively devise and implement programs to eliminate the gender wage gap.

In the Fall 2014 issue of Contemporary Economic Policy, two Lehigh University economists seek to answer the counterfactual question: What would have happened to the wage gap in Ontario if the act hadn't been passed?

To answer it, they employ an algorithm that uses data from other Canadian provinces, including Gross Domestic Product per capita and employment rates, to construct a "synthetic" version of Ontario before and after the law was passed. The only difference between the real Ontario and the synthetic one is the wage gap law. They find that in both Ontarios, the wage gap narrows from 35 percent in 1988 to 30 percent in 2005. In fact, the latter wage gap was slightly smaller in synthetic Ontario.

The researchers conclude that the law "failed to affect women's pay relative to men's in Ontario in any clear, discernible way."