"Comparable Worth" vs. Supply and Demand

(Editor’s note: The following commentary was first published Aug. 29, 2001. It is being re-run in light of the Michigan House of Representatives’ April 22 passage of House Bill 4625.)

What is "comparable worth?  What is its purpose, how frequently is it used, and what are some advantages and disadvantages?

Comparable worth—known also as "pay equity"—is not to be confused with "equal pay for equal work," which is the law of the land.  Equal pay for "comparable" work is an entirely different animal.

Equal pay for equal work requires that a woman be paid the same as a man, or another woman, who is doing exactly the same job.  Comparable worth, by contrast, seeks to expand the concept of fairness in ways that clearly violates simple economic reality.  It focuses on paying an entire profession or occupation the same wage as another, very different, profession or occupation that is determined by some outside authority to be of the same "worth" or value to an employer.

The idea is that individual workers who perform jobs of substantially comparable value to their employer should be paid similar wages.  If the work done by an accountant is deemed to be as valuable to an employer as that done by a typist, for example, the law would require the two employees to earn the same wage.   In Minnesota, firefighters in the city of St. Paul were ranked as having the comparable worth of the city's librarians.

This approach carries with it the implicit assumption that wages and prices don't actually reflect real value—that they are simply arbitrary judgements on the part of employers and consumers, and can therefore be manipulated with impunity.  But they can't, and the utter failure throughout history of wage and price controls proves it.  Any commodity, service or task "has" a value to society, and prices and wages will either reflect this value accurately, resulting in a balance between production and consumption, or they will fail to do so, resulting in shortages or surpluses.  Historically, allowing markets to operate freely has proved to be the best way to keep supply and demand in equilibrium, resulting in the most widespread prosperity.

A comparable worth scheme imposed on private-sector employers would arbitrarily and effectively abolish the role of supply and demand in the labor market.  It's an utterly incompetent replacement: someone's "calculation" of the value of one job compared to another, imposed by force of law.  Since this flies in the face of basic economic reality, it would produce a playground for lawyers and a bottomless pit of costly litigation. 
Advocates see comparable worth as a tool to end discrimination against women in the workplace.  They see wages in female-dominated occupations lower than wages in male-dominated occupations and assume that the disparity is entirely caused by discrimination.  However, many rational factors explain the disparity. 

The simple fact that women have children and are far more likely than men to leave their jobs to care for children makes them, as a unit of labor, less valuable than men.  This isn't a negative judgement on women, it's simple acknowledgement of social and economic reality.  In addition, women are more likely than men to follow their spouse to a new living location to take advantage of professional opportunities.  Again, this is not to say anything about the rightness or wrongness of the practice; it is simply a reality that manifests itself in economic terms.  Another difference is that men are usually physically stronger than women and are able to work with less risk in jobs that have a higher probability of physical harm.  Of course, this "inequity" has its tradeoffs: Men account for 94 percent of occupational fatalities each year. 

Differentials between the pay of men and women exist because women entering the work force generally have less education (although this is changing rapidly), fewer skills and are higher economic risks for employers than their male counterparts.  Ignore these realities and you step into the realm of, well, unreality.

Some years ago, the National Committee on Pay Equity claimed that women earn only 71 cents for every dollar men earn.  Not only did that oft-quoted figure ignore the factors cited above, it didn't even take into account the differential between hours worked, on average, between men and women.  Women, for many reasons, work fewer hours per week and fewer weeks per year, on average, than men do.

Some comparable worth advocates unwilling to overturn supply and demand in the private sector have focused instead on the public sector.  In 1984, Minnesota became the first (and so far, the only) state to mandate that all local units of government devise and implement comparable worth schemes.  St. Paul is a city whose experience with comparable worth typifies that of local governments across the state: $32 million in additional salary expense between 1985 and 1992, endless disputes about who is comparable to whom, and lingering uncertainty as to whether the city is in compliance with the law.

In his authoritative 1993 book, "Incomparable Worth," University of Virginia economist Steven E. Rhoads showed that after depressing the wages of computer specialists and nurses in order to achieve "pay equity," Minnesota localities can't find people willing to take those jobs.  Women, according to Rhoads' findings, are not clear winners when labor markets are distorted and wages are set by politics and politicians. 

We don't live in a perfect world.  And while it may be true that allowing the market to determine prices and wages sometimes creates situations that seem unjust, the argument in its favor is similar to Winston Churchill's argument in favor of democracy: It's the worst system in the world—except for all the others.

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"Comparable worth schemes seek to expand the concept of fairness in ways that clearly violate simple economic reality."