18. ECONOMIC INTERVENTION, DISCRIMINATION, AND UNFORESEEN CONSEQUENCES

GOVERNMENT INTERVENTION IN SUCH ISSUES AS HUMAN RIGHTS, discrimination, affirmative action, and equal pay for equal work is commonly seen as productive, efficient, and just—in a word, as on the side of the angels. On the other hand, businessmen, employers, the marketplace, and the profit system are often viewed as the “devil” in the scenario as far as racial, sexual, and other prejudices are concerned. Evidence cited for these evaluations is black-white and male-female earnings differentials, discriminatory behavior on the part of private employers, and the widely trumpeted good intentions of those charged with administering human rights programs. The government, in short, is seen as part of the solution to the predicament of minorities; the private sector is viewed as part of the problem.

Yet, at least with regard to several well-known and highly acclaimed public sector initiatives, this conventional wisdom is suspect. To show this, we will consider the argument that affirmative action, equal pay for equal work, and various anti-discrimination measures have boomeranged: although specifically created to help people who have been the object of discrimination, they have had unintended and negative consequences. We shall also deal with such programs as minimum wage laws, anti-usury provisions, zoning, and rent control legislation. While not purposefully aimed at alleviating minority group suffering, these have, nevertheless, had the very opposite results from those intended, and the ills have particularly focused on society’s most downtrodden minority group members.

MINIMUM WAGE LAWS

The avowed intention of minimum wage laws is to raise the wage levels of workers at the bottom of the employment ladder. Instead, the actual effect of such legislation has been to cut off the bottom few rungs of this ladder, thus making it far more difficult for lesser skilled workers to achieve high or even moderate-paying jobs.

The explanation for this is straightforward. If, for example, the law compels that a minimum of $3.25 per hour be paid, the employer will suffer grievous losses if he hires a worker with a productivity of, say, $1.25 per hour: the firm will have to forfeit the $2.00 per hour differential between the $3.25 it must pay and the $1.25 value it receives. Naturally, under such circumstances, the employer will be extremely reluctant to hire such an employee. And the fate of low-productivity workers is thus clear—unemployment.

Without the minimum wage law, such a worker could be employed at $1.00 or $1.25 per hour, and not unemployed at the relatively exalted wage of $3.25—where his actual earnings are, of course, nil (excluding unemployment insurance). Worse, he is thus precluded from learning the skills necessary to command entrance to the higher wage brackets. Under this law, the worker must already be worth $3.25 per hour or more to be employed at all. Thus, the minimum wage law cuts off the bottom rungs of the employment ladder.

COMPENSATING DIFFERENTIALS

What does this have to do with discrimination against racial and other minorities?

Let us assume (1) a minimum wage level of $3.25 per hour, (2) two young lads—one white, one black—each with productivity of $3.25 per hour, competing for the same job, and (3) a white employer prejudiced against hiring blacks. Under such, perhaps typical, circumstances it is easy to see that the white lad will easily be able to out-compete the black for the job. The two prospective employees are economically indistinguishable, and the employer can indulge his taste for discrimination at no cost to himself.

In the absence of the minimum wage law, however, the traditional economic weapon of the downtrodden can come into play: his willingness and ability to accept a lower wage offer. If the white youngster insists on $3.25 per hour, but his black competitor is willing to work for only $3.10, $2.50, or $1.90 per hour, or even less, then it is not at all clear that the white will be hired, even by an employer prejudiced against blacks.

More realistically, and unfortunately, the sad fact is that the productivity of the white youth is likely to be greater than that of the black. The reasons for this are well known. They include differential educational, cultural, and motivational backgrounds, as well as preparation, related work skills, breakdowns of the family unit, and a host of other unquantifiable phenomena.¹ But the effects of the minimum wage law are painfully obvious: if the average productivity of white youth is, say, $3.25 per hour compared to $3.00 per hour or less for black youth (each with some variance), and the law requires that no less than $3.25 be paid in wages per hour, it is easy to see that the black youth will less likely be hired than the white. And this result stands even on the assumption that all employers are “color-blind” (i.e., they seek only to maximize profits). For the law penalizes employers who hire black youngsters (their expected loss is 25 cents per hour) relative to those who hire whites (no expected loss in this numerical example).

The statistical record more than bears out the contention that the minimum wage law creates teenage unemployment for both whites and non-whites, but especially for the second group. In 1948, for example, when the effective minimum wage rate was much lower, and when racial prejudice was more widespread, marked, and virulent than today, white teenage unemployment in the U.S. was 10.2 percent, while black teenage unemployment was only 9.4 percent. Today, in a much less discriminatory epoch, but where teenagers are “protected” by a more stringent minimum wage law, white youth unemployment is 13.9 percent, while black youth unemployment is an astounding and shameful 33.5 percent.²

EQUAL PAY FOR EQUAL WORK

There are important implications to be drawn from this insight relevant to the spate of laws now being enacted and implemented in Canada and the U.S. known under the generic term “equal pay for equal work.”³ Although such interferences with the market economy are usually intended to benefit women, analysis of such laws can be applied to blacks, native peoples, francophones, or, for that matter, to redheads.

An essential point brought forth in the previous discussion was that the downtrodden group had one ace-in-the-hole: the ability to work for a lower wage than everyone else. Although perhaps the object of scorn, derision, and hatred, the minority member was able to claw his way back into economic respectability because he was so eminently employable; his willingness to work for less made him an economic attraction even to those most prejudiced against him.⁴ Take this one advantage away, and he would have been at the mercy of those whose greatest pleasure consisted in his discomfiture.

But this is precisely the effect of “equal pay for equal work” (EPFEW) legislation. Although conceived with perhaps the best intentions, such laws banish, at one fell swoop, the ability of a group, in this case females, to counteract the economic discrimination they may suffer in modern society. The harm to the cause of women is immense, for EPFEW does not require that women be hired. It only mandates that if a woman is hired, she be paid the same as men of equal productivity. But what good is a law that can push female unemployment rates up through the roof while ensuring “equal pay” for jobs they don’t have and will not be able to attain?⁵ EPFEW legislation will create a field day for those who wish to drive women “back into the kitchen.” Feminists support this only at the risk of whatever economic gains women have made in recent years.

Perhaps the starkest example of the operation of this particular economic law occurs in South Africa. In that racist society, job reservation laws are presently on the books, which, as the name implies, specifically reserve certain occupations for certain races. That is, the law compels that there be “white jobs,” “black jobs,” and so on.

But white racist labor union leaders, the beneficiaries of such legislation, are actually on record expressing a willingness to have job reservation laws abolished—provided EPFEW laws are substituted in their place.⁶ With friends of EPFEW legislation such as Arrie Paulus, the head of the South African (whites only) Mine Workers Union, it surely needs no support of feminists.

ARBITRARINESS

Another difficulty is that “equal opportunity” is a subjective, not an objective, phenomenon.⁷ Women do not come equipped with a little tag which indicates their productivity, once and for all, in a manner from which no dissent is possible. (Nor, of course, do men.) Productivity, rather, is a continually changing phenomenon which varies with, for example, education, intelligence, age, experience, presence or absence of complementary factors of production, which can only be partially quantified, as well as with such factors as motivation and determination, which are completely incapable of exact measurement.

Productivity must be estimated (or guessed at) by entrepreneurs, who do so every day, and lose money for each mistake they make. They are far more able to make such determinations accurately than are judges and juries who have little experience in this endeavor, and risk no personal funds if they err. Since they assume that productivity measurements are easily ascertainable, EPFEW laws are at variance with the facts. They are thus incapable of fair and non-arbitrary implementation.

THE EARNINGS GAP

This is not to say it is completely implausible to support the position that EPFEW laws are required. There is ample evidence to suggest that male and female compensation and promotion rates differ. For example, the overall female/male wage ratio for all employees in Canada was 485 in 1979. That is, females, on average, earned only 48.5 percent as much as males.⁸ The question is whether or not this reflects an inherent problem in the labor market. The proponents of EPFEW apparently think so. But it is an error to conclude, from such information, that the state of affairs is a result of conscious and hostile human design (i.e., employer discrimination against women), that this is disgraceful and unfair, and that therefore a determined effort on the part of government is required to “right these wrongs.” Consider, in this regard, the statement of no less an authority than Dr. Ratna Ray, Director, Women’s Bureau, Labour Canada:

Of our three-part series—Facts and Figures—this part is the most critical, because it shows the patterns of earnings in the Canadian labour force. Readers will soon notice that women’s earnings are still lagging disgracefully behind in a society in which “How Much Is That Doggy In The Window” pretty well rules our lives.

Economic self-sufficiency for women? “We’ve only just begun!” Despite sporadic progress, there’s a long way to go. Canadian employers, economic planners, and decision-makers should take a long hard look at these figures. Because they tell a shocking story, a story of shortsightedness and languorous efforts towards the utilization of human resources in the workforce. Our publication comes hard on the heels of the National Council of Welfare’s report Women and Poverty which concludes that “After fifty years or so of unpaid, faithful service a woman’s only reward is likely to be poverty.”⁹

Such an interpretation, no matter how widespread, is far from proven.

The difficulty is that there are several alternative hypotheses which can explain why women’s wages, incomes, and salaries lag behind those of men. When these are acknowledged, it is no longer necessary to resort to discrimination on the part of the employer, business prejudice, or “capitalism” as explanations for the male/female earnings gap.

Men and women differ in a wide range of economic, educational, and sociological characteristics, each of which exerts an independent effect, raising expected male incomes and reducing expected female incomes. For example, working men tend to be older¹⁰ than women, more highly concentrated in the higher-paying professions,¹¹ more heavily unionized in the highly skilled and legislatively protected blue-collar industries,¹² and tend to work, to a greater degree, on a full-time, full-year¹³ basis.

CORRECTIONS IN THE ESTIMATES

Not unexpectedly, when female/male income comparisons have been corrected for these factors, the ratio tends to rise. If working women are assumed to retain their own income levels, but to take on the same age pattern as working men, the female/male income ratio rises from 485 to 521; if we assume that females are divided among elementary and university teaching in the same manner as males, the ratio increases from 743 to 814; if the female/male income ratio is corrected in a similar manner for full-year or part-year status, it increases from 528 to 575. See Table l.¹⁴

As important as these variables are, the strongest determinant of the so-called male/female earnings “gap” is none of these things. Rather, it is marital status, and the asymmetric effects of marriage on male and female earnings. That is, marriage increases male earnings, and reduces female earnings.¹⁵

Source: The Labour Force, December 1980, Catalogue No. 71-001, Statistics Canada, pp. 75–105. Teachers in Universities, Catalogue No. 81-241, Statistics Canada, p. 57. Income Distributions by Size in Canada, 1979, Catalogue No. 13-207, Statistics Canada, pp. 99, 104–09.

This occurs for many reasons. Wives, to a greater degree than husbands, take on a higher and disproportionate share of child care¹⁶ and the housework and homemaker tasks.¹⁷ They are more likely to quit their jobs if their partner receives a better job elsewhere,¹⁸ to interrupt their careers for domestic reasons,¹⁹ to place their homes and families ahead of their jobs or professions,²⁰ and even to purposefully attempt to keep their earnings below that of their spouses.²¹ It is impossible to quantify the effects of such phenomena in driving a wedge between married male and female incomes, but there is little doubt that they are important.

The asymmetrical effects of marital status on earnings by sex can be seen by a perusal of Table 2, which abstracts from such variables as age, occupation, location, full time or part time, and unionization.

Here, the female/male income ratios diverge widely, based on marital status. Throughout the 12-year span covered, the married category has consistently shown the lowest ratios, the singles show the highest, and “other” (widowed, divorced, separated) has occupied an intermediate position.

So stark is the difference that the female/male income ratio actually doubles (or more) as we move from married to single status. This ratio even approaches unity, although without ever quite reaching it, in eloquent testimony to the differential effects of marriage on earnings.

There is, however, a difficulty with these data: they are not precise enough. They include not only wages and salaries, which can, perhaps, serve as a basis for employer discrimination, but also income from self-employment, investments, pensions, and government transfers, which clearly are unrelated to employer discrimination.

WAGES AND SALARIES ONLY

In order to remedy this situation, we turn to Table 3, which includes only wages and salaries and specifically excludes all other income. As a test of the hypothesis that marital status has widely asymmetrical effects on earnings by sex, Table 3 is an improvement over Table 2 in yet another way: it collapses the categories of “married” and “other” into “ever-married,” which, as the name implies, includes all people who were ever-married, regardless of the marital status they now occupy. That is, it compares people presently married, divorced, widowed, or separated, with those who were never married in their entire lives. Table 3 thus furnishes a comparison of people who have been touched in some way by the institution of marriage with those who have not.²³

(1) Married and Total figures are published in each year’s Income Distribution by Size (Statistics Canada, Catalogue 13-207). Single and Other averages are from unpublished tables. Survey of Consumer Finances, Statistics Canada.²²

(2) In 1972, “Single” figure includes Single and Other.

Source: This table is based on calculations made from the empirical record compiled by Peter Kuch and Walter Haessel, who used the Public Use Sample Tape as a source (computed for individuals aged 30 years and over). See their Census Analytical Study written on behalf of Statistics Canada and entitled: An Analysis of Earnings in Canada (Ottawa: the Ministry of Industry, Trade, and Commerce, 1979 Catalogue No. 99-758E), pp. 113, 206.

And the results are truly staggering! Never-married females in Canada earned $4,169.72 in 1971, while their male counterparts registered earnings of $4,201.24. The differential by sex for those who have never been married amounted to only $31.52 for an entire year; this translates into a female/male earnings ratio of 99.2 percent!

We can see, too, that the poor earnings record of all females compared to all males (a ratio of 37.4 percent) is almost entirely a function of “ever-married” status (a ratio of 33.2 percent). As of 1971, at least, Canadian women who have never been married have indeed “come a long way, baby’ toward earnings equality with men.

MARKET IMPEDIMENTS

While for the most part wage differentials reflect attributes of employees other than sex, it is true that impediments to market operation may produce discrimination-like wage differentials. Impediments which have this effect include minimum wage laws and union entry restrictions. However, the most significant impediment to market response is that a large fraction of the labor force is employed by the public sector.

Public sector employers, unlike their private sector counterparts, have no financial incentive which inhibits them from discriminatory employment practices. The public sector bureaucrat neither gains nor loses financially as a result of his or her employment decisions, and is free therefore to engage in whatever form of discrimination suits him or her.

Even in this case, however, EPFEW laws and/or quotas may not be in the best interests of the oppressed, a question to which we now turn.

AFFIRMATIVE ACTION IN THE PUBLIC SECTOR

It is impossible to overestimate the importance of the distinction between discrimination in the private and public sectors. We have seen that in the former sphere, there exist market forces which continually erode the scope of prejudicial behavior. There is, unfortunately, no such tendency in government.

Given the great difficulties, social costs, and unintended negative consequences of proportional representation requirements, quotas, and other similar prescriptions based on retrospective results, and given the market’s ability to reduce discriminatory behavior—in the absence of legislation which retards this process—a case is made, throughout this book, against the employment of affirmative action programs in the private sector.²⁴ We also noted above that the incentive system operating in the private sector may not work in the public sector. Accordingly, we must now assess the case for equal opportunity programs (based on quotas and proportional representation) in the field of public employment.

At the outset, this seems an attractive idea. There are thousands of minority group members, especially in the southeastern U.S., in the northern and western states, and in many of the Canadian provinces as well who have been victimized by discriminatory hiring practices on the part of public agencies. This has imposed real and lasting costs on the groups out of favor, whether based on race, sex, national origin, or some other criteria.

Discrimination in the public sector, moreover, is considered unjust and immoral by many. The funds which pay for government employment come from all citizens—including minority members. For anyone to be excluded from a public job because of race, sex, national origin, sexual preference, skin color, or any other such criteria,²⁵ after being forced to pay for this very same unemployment through coercive taxes, is nothing more than a cleverly disguised, but particularly insidious, form of exploitation.²⁶

PUBLIC SECTOR QUOTAS?

Despite the superficial attractiveness of quotas for every conceivable minority group in the public sector, the case for such a program diminishes upon deeper analysis.

The difficulty is that quotas are unjust.²⁷ The beneficiaries (in those rare cases where someone actually benefits) are the wrong people: the 18- to 21-year-olds, applying for their first jobs, who never bore the brunt of past employment discrimination, by definition. The real victims are those who would have liked to have been police officers, firefighters, letter carriers, and civil servants in the past but were not even considered, even though fully qualified, because of their race or sex. But these people, for the most part, are already either settled in their present jobs or retired from the labor force. If anything, monetary settlements might seem a preferable alternative.

Another problem is that quotas are based on the premise that in the absence of discrimination, each minority group would be proportionally represented in every job classification. But as Sowell and Williams make abundantly clear in their contributions to Block and Walker, Discrimination, Affirmative Action, and Equal Opportunity, not only is there no evidence for this conclusion, there is every reason to believe the exact opposite. Minority groups are heterogeneous, with different ages, educational levels, geographical locations, cultures, histories, and so on.

If quotas are not the ideal answer, what may be done instead to correct the obvious injustice of discrimination in the public sector?

A MODEST PROPOSAL

One suggestion is that laws prohibiting discrimination in the public sector be strengthened. This would include severe fines and loss of job penalties to the individual civil servants found guilty of such behavior. Fines leveled on government per se would do little good since they can be passed along to (innocent) citizens through higher taxes. People who feel victimized by discriminatory practices on the part of government would be able to sue for damages on this account, and freedom of information laws would be broadened so as to allow access to employment application test scores or other relevant documents upon which such a suit could be based. If such machinery is put into place, in this view, it will go a long way toward stopping public sector discrimination, de facto as well as de jure.

INSURANCE

Laws prohibiting discrimination also threaten to play havoc in several other fields. Insurance companies commonly “discriminate against” the elderly and the sickly; they either refuse to grant life insurance, or only do so at significantly higher premium rates, for example, to a 70-year-old man with a heart condition. Should such discrimination be permitted?

Insurance is an industry dedicated to pooling and spreading risk.²⁸ While health, injury, or sickness of any one person is beyond prediction, actuarial tables have been established for the probability of such occurrences in the aggregate. Because of this, insurance companies can charge premiums to large numbers of people and underwrite the costs of the unfortunate few; all customers pay a relatively small amount, in effect, for the security that should they be struck by calamity, they or their loved ones would be protected from great expenses, and thus would remain financially secure.

But if the system is to work well, the insurance company must make fine distinctions between people regarding the likelihood of catastrophe. It must base the payment of premiums on the degree of risk. (Indeed, its profits depend almost entirely on this ability.) Failure to make these distinctions (i.e., discriminations) based on riskiness, and to tailor premiums to the degree of risk, will lead to bankruptcy, for the low-risk customers will tend to migrate to other insurance firms, encouraged by the lower premiums there. The company which does not discriminate will therefore be left with high-risk patrons; it will either have to charge them more, thereby effectively discriminating (specializing in high-risk ventures) or face bankruptcy as the high payouts swamp the small premiums.

It might be argued that all insurance companies should be forced to adopt a non-discriminatory posture. In this way, it might be contended, none of them could gain a competitive advantage over any of the others.

A DIFFICULTY

The difficulty with this plan is related to a little known but highly important benefit conferred upon society by insurance. (The social good created by the insurance industry is as hard to overestimate as it is unknown by the general public.)

Let us suppose that overeating leads to heart disease, that houses built in geographical areas A, B, and C run greater risks of fire, storm, or flooding damage, and that high marks in high school driver education courses are associated with fewer automobile accidents. As a result, insurance companies, in their unending quest for profits, will charge lower premiums to people who alter their actions to conform to these discoveries (losing weight; not building in dry forests or near flooding rivers; enrolling in traffic safety courses).

People are thus led, as if “by an invisible hand” (but actually by the insurance industry and the price system) to try these different modes of behavior. Apart from the inalienable right of insurance companies, and everyone else, to practice this sort of discrimination, this is why it would be very unfortunate to prohibit all insurance companies from discriminating: there would be fewer economic incentives rewarding and encouraging such “safe” behavior.

PENSION PLANS AND SNOOPING

A case in point is the recent Canadian Human Rights Commission regulation²⁹ condemning discrimination between men and women with regard to pension plans. It is a plain actuarial fact—established through years of insurance experience—that women tend to live longer than men. With sexual discrimination prohibited, equal pension premiums would render men more profitable customers to insurance companies, as on average they will collect benefits for fewer years. The Canadian Human Rights Commission prohibition will therefore tend to result in (1) the encouragement of male over female labor (men will now be cheaper to employ); (2) the segregation of the labor force by sex (so that no one employer would have to make different contributions on this basis); (3) the withdrawal of employers, especially small ones, from pension plans altogether; and/or (4) the migration of companies to areas which do not prohibit discrimination in pension premium payments on the basis of sex. Needless to say, any of these eventualities would effectively discourage workers from pooling risks concerning retirement income.

Another case in point is the order of the Ontario Consumer and Commercial Relations Ministry to the Fireman’s Fund Insurance Company. The ministry enjoined the insurance company from questioning its clients about their convictions on alcohol or sex-related offences, on whether they are usually restless, sad, or sweaty at night, and on other personal subjects.³⁰

Frank Drea, the former Ontario Consumer Affairs Minister, objected to this practice on two grounds: first, he claimed it was an invasion of privacy; and, second, that it was compulsory, since the company offered a discount on its policies of up to 30 percent for those who filled in the questionnaires and demanded full price from those who refused.

CUSTOMER DISCOUNTS

There are some serious difficulties in this position. Scores of firms, representing dozens of industries, offer customers a discount if they, in turn, do something, otherwise onerous, desired by the company; and they refuse these special discounts to customers who will not so accommodate them. For example, many banks offer customers who maintain certain minimum ($500) balances free or reduced-price checking services, and refuse this to those whose deposits are not sustained at these levels. Mail order houses usually give special benefits to those who pay in advance.

Other firms commonly offer discounts only to those who will, for example, shop, demand service, purchase, or put in an appearance at a time convenient to the supplier, not necessarily to the customer, and refuse price reductions to those who insist on satisfying their own schedules. Department stores offer discounts at “January and August white sales” to people who defer their sheet and linen purchases until after the holiday and summer season; bowling alleys typically discount their admission prices to those who play from midnight to 4 a.m.; church dances usually reduce their ticket prices to patrons who show up “early” (i.e., “before 8:30 p.m.”); theatre goers can often save money by attending matinees, not Saturday evening performances; airline travel costs less at night than during the daytime. Government rate-setting boards have even accorded permission to electric and telephone utilities to vary price in correlation with peak demands (long distance telephone calls cost more during business hours than in the wee hours of the morning).

CONSUMER TIPS

It is well known and has been for many years that those who buy “wholesale” or in bulk can usually save money compared to fellow shoppers at the retail level. But recently, special discounts have been offered by “no frills” grocery supermarkets, and by “self-service” gas stations—but only to customers willing to make the special efforts required on their behalf. Similarly, people are learning that giving advance notice to companies usually leads to special discounts. Examples include booking airline flights well ahead, purchasing a series of concert tickets for the whole season, subscribing to magazines for two or three years at a time, joining a book or record club, and committing oneself to a certain level of future purchases. Financially troubled municipalities such as New York City have even given special real estate tax breaks to property owners who pay in advance, while charging the same old (high) rates to those who pay on time.

Would anyone care to suggest that these and other similar commercial innovations amount to compulsion? To coercion? That these firms “have no right” to offer their customers discounts as a reward for behaving in a way that the firm wishes? Hardly. And since there is no difference in principle between an insurance firm offering discounts to customers who answer survey questionnaires and all these other cases, Drea’s charge of compulsion and harassment against the Fireman’s Fund Insurance Company falls to the ground.

Nor is this practice an “invasion” of privacy. It is rather a voluntary confidence of a personal nature given by the client to the insurance company, in return for the 30 percent rate reduction. It is certainly no more an “invasion” of privacy than the voluntary confessions widely accorded to clergymen, lawyers, and psychiatrists in our society. To be consistent with its Fireman’s Fund decision, the Ontario Consumer and Commercial Relations Ministry would have to ban personal declamations in these areas as well—ludicrous and manifest folly if ever there was one.

WHY THE QUESTIONNAIRES?

Having settled the legitimacy of these questionnaires, let us now inquire as to their social usefulness. The insurance company did not embark upon this project out of sheer cussedness, perversity, or morbid curiosity; it was rather an attempt to save money for its customers, and thereby earn greater profits for itself—something fully in keeping with its legitimate mission as a Canadian business firm.

How does this work? If Fireman’s Fund could better discriminate on the basis of its questionnaire between high- and low-risk customers, it would be in a position to ask lower premiums of the latter group while still maintaining, or even increasing, its profit returns. And not only that. The company could then expand its base of operations with its new lower rates, attracting customers both from competitors and from the presently non-insured public. Conceivably, this greater volume might even allow the firm to pass some of these savings on to its original high-risk customers, thus benefiting both the high- and low-risk groups. If not, even the people in the high-risk group are still not made worse off by the questionnaire, as they are always free to patronize other insurance companies which do not make these fine distinctions.

Alternatively, the scheme might fail and may not reliably measure risk; it might be too costly to operate, even if it does. In this case, the company, and it alone, will be the loser. It would be unwise public policy to prohibit such experiments, even so; first, because we cannot tell in advance whether it will succeed or not; and, second, because this is precisely how commercial progress is gained—through trial and error.

“AGEISM”

There are also affirmative action guidelines approved by several U.S. Bank Regulatory agencies³¹ prohibiting discrimination in borrowing. These bar credit application discrimination on the basis of race, color, religion, national origin, gender, marital status, age, and receipt of public assistance benefits. Let us take age as an example, and apply the analysis developed above.³²

The abiding interest on the part of the lender, it can readily be imagined, is the likelihood that the principal, plus interest, will be repaid; and if not, that there will be enough collateral to make good on the loan. All else pales into relative insignificance compared to this main concern.

One obvious shortcoming with age non-discrimination is that persons under a certain age, usually 16, 18, or 21, depending on the jurisdiction, are not even legally obligated to pay their debts. Surely banks and other lenders could reasonably be expected to “discriminate” against such persons, under present legal codes. But even if these laws were rescinded, or if the affirmative action guidelines on age were reinterpreted so as not to apply to such young people, difficulties still remain.

An important determination in lending policy is the creditworthiness of an applicant: the likelihood that he will repay, on time, at no further cost or inconvenience to the financial institution. And young people, even if legally liable for their debts, are not widely perceived as sufficiently creditworthy. Consider a person aged 22 who wants to borrow $4 million. He may have enough collateral such that, if he defaults, the lender would be able to recoup his losses. But this costs money, time, and aggravation. An older person with a longer track record may be more attractive, even if he has less collateral.

Forcing banks to ignore the age of the borrower would put them at a competitive disadvantage relative to other lending institutions. And if all lenders could somehow be prohibited from discriminating on the basis of age,³³ this would entail higher recovery costs for bad loans. Banks would thus be forced to offer lower interest payments on savings. This would reduce saving, investment, and lending, with negative repercussions on the economy.

SIZE DISCRIMINATION

Affirmative action has also been applied, all across Canada, to personal characteristics such as height. In Edmonton, for example, Tall Girls Shops Ltd., a family business with branches in 13 major cities,³⁴ was refused permission by the Alberta Human Rights Commission to advertise for tall (female) sales clerks. Mr. Gould, the general manager of the concern (which caters to women who average 5' 10" in height, and excludes women below 5' 7"), felt that tall sales clerks “could better understand the needs of their customers.” But this line of reasoning was rejected at a Human Rights Commission meeting held in Calgary.

It is easy to see why the Alberta Commission withheld permission to advertise for tall sales clerks: discrimination is, after all, discrimination, and must be stamped out under the Human Rights Code. It is a little more difficult to discern why Tall Girls Shops Ltd. was allowed to continue discriminating against men in its quest for tall female clerks. The commission gave “for reasons of modesty” in explanation, but did not venture to show why mere “modesty” was placed before presumably more important “human rights.”

Nor is it clear why this company was allowed to continue its discrimination against short customers, while being reprimanded for favorable treatment accorded tall employees. Surely the very name of the Tall Girls Shops Ltd. may be considered an affront to short women who want to purchase clothing. One cannot help wondering if the day will ever arrive when tailoring clothes for people in accordance with their height and girth will ever be considered discriminatory and therefore prohibited; such a practice must of necessity make (invidious) distinctions between individuals, and this is what the equalitarian philosophy would appear to deem improper.

HOW TALL IS TALL?

Similar analysis can be applied to the Toronto Towers Tall Club,³⁵ which limits membership to men above 6' 2" and women exceeding 5' 10". This organization puts on a beauty contest in order to pick a “Miss Tall Toronto”—an “unfair” contest if ever there was one, because it necessarily precludes short women from consideration. (We pass lightly over the question of whether beauty contests per se—and perhaps the institution of marriage, for that matter—improperly discriminate against ugly people.)

But these are matters of aesthetics, unworthy, perhaps, of the attention of dismal economists. More to their interest then will be a statistical study which concludes that 6' plus men in the United States earn 8 percent more than their shorter counterparts who are under 5' 6". This works out to a $500 annual pay hike for each additional inch of height. A Canadian survey shows similar results. Men who earned $25,000 per year or more were 3.7" taller, on the average, than those whose income fell into the $5,000–$10,000 bracket.³⁶

SHORT POLICE

Another case of height discrimination took place in Toronto, where local police were criticized in the Clement Report, chaired by the former Attorney General of Ontario.³⁷ The finding was that the current minimum physical requirements of 5’ 8” and 160 pounds for men are discriminatory.

In defense of these rules, Philip Givens, Chairman of the Metro Board of Police Commissioners, stated, “We don’t want a 5’ 5” karate expert; we want someone who will be able to put down a potentially volatile situation just by walking in.” Mr. Clement rejected this reasoning and suggested instead the RCMP system, whereby potential recruits are awarded points for height, weight, strength, intelligence, education, etc., in competitive examinations.

But there are difficulties with this alternative as well. While a point system based on height may be more flexible than an outright prohibition, it is no less discriminatory. Short people are still placed at a disadvantage when awarded fewer points than their taller brethren. (The point system, moreover, discriminates against all people with low scores on the other criteria, such as weight, strength, intelligence.) Right now, the National Basketball Association practices outright discrimination against short people (other things equal—such as speed, endurance, intelligence—they prefer the seven footer to the five footer). Would anything essential change if the NBA were instead to adopt the RCMP method of allocating joint credits partially based on height? Hardly. Short people would still find it more difficult to find acceptance in this “world of the giants.”

RENT CONTROL LEADS TO DISCRIMINATION

When rents are forcibly held below the point at which demand and supply can be equilibrated, the amount of residential housing space tenants want to occupy exceeds that which landlords are willing to make available. These extra rental units have to be rationed in some manner. With upward movements in rent levels precluded by law, other mechanisms play a greater part.

Nepotism, discrimination, favoritism are the answers; all play an increased role. The landlord cannot (legally) charge more rent; so he feels, with some reason, that he can pick and choose on whatever other basis suits him. If he is so disposed, for example, he can choose beautiful young women as tenants, or people without children, or, given the case we are considering, white persons.³⁸

At one fell swoop, the least favored elements of society, the groups who otherwise would bear the brunt of discrimination (tenants with children, ugly women, older persons, homosexuals, blacks, native peoples, minority group members) will have lost the one thing that enables them to compete with more “attractive” individuals: the ability to pay for what they want. Prohibited by law from offering greater financial remuneration, they will be at the bottom of the list of tenants waiting for choice apartments.³⁹

USURY

Usury prohibition is another law created with the best of intentions but which has unintended and negative side effects on the poor and racial minorities—the very people the enactment was (presumably) designed to protect. A law which places a ceiling on interest charges might seem to guarantee loans at lower rates than would otherwise have taken place. After all, if the law compels interest on loans lower than otherwise might have prevailed, it would seem to follow that people would be able to borrow money at improved terms, and that the poor and minority group members might be the beneficiaries of such a program.

In actual practice, however, nothing could be further from the truth.

What determines the interest premium people pay for loans is their creditworthiness, the likelihood that they will repay. Credit-worthiness is not something granted to the borrower by the lender; on the contrary, the borrower has it, or fails to have it, when he makes the first approach. It is based on, among other things, reputation, reliability, “standing” in the community, collateral, hard work.

For reasons that need not concern us here, blacks and other minority group members are usually perceived to have less creditworthiness than other people. They are regarded as high risk borrowers. They do not pay the prime rate (the rate charged by banks to their most wealthy, reliable, and established customers); nor do they pay even the slightly higher rates usually accorded businesses and individuals with more modest financial accomplishments. When minority group people obtain loans at all from “legitimate” sources, they find they must pay additional premiums which defray the higher risks undertaken by those who agree to lend them money.

NO LOANS

But if legitimate lenders face an interest ceiling, they will not be able to recoup their losses on high risk loans with premium interest rates. Their natural inclination will be not to lend money at all to high-risk minorities.⁴⁰ Leon Louw says,

In other words, the only way in which poor people can compete with rich people for the available credit or capital is to offset their disadvantage in terms of risk by offering a compensating difference in the form of higher interest. Usury laws limit the maximum permissible interest rate or terms of repayment to that level at which rich people or low-risk borrowers can obtain credit, but at which high-risk borrowers are priced out of the market. This means that the law paraded as being for the protection of the poor against exploitation, in fact discriminates against them and diverts credit and capital from the poor to the rich.⁴¹

Enter the “loan shark,” or black market lender. Cut off from the normal source of loanable funds, the high risk minority borrower has no alternative but to turn to the underground or underworld economy. Here, such niceties as interest rate ceilings are ignored. The result is much higher interest costs than would otherwise prevail.⁴² Nor is the lender hemmed in by time-consuming legalistic machinations; in case of default, he can quickly send in his goon squad with baseball bats and “cement shoes” to ensure loan repayment.

The prohibition of usury, then, has the exact opposite effect to its widely trumpeted intention. Instead of lowering interest charges for the poor and minority group members, it raises them. And instead of dealing with a bank or legitimate finance company, it forces the poor and minority group member into the clutches of people who will not hesitate to inflict serious physical sanctions in case of default.

ZONING

Zoning is another legislative enactment which, although it does not even mention specific racial or ethnic minority groups, nonetheless has the effect of discriminating against them.

How does this work?

Zoning was conceived in order to preclude the close location of “incompatible land uses,” such as the proverbial glue factory and office tower.⁴³ But even this noble-sounding mission is fraught with danger for the poor and minority group peoples, for under the guise of eliminating such obvious nuisances, zoning has made it more difficult for any commercial enterprises to infiltrate into the poorer neighborhoods.

This zoning prescription appears as an obvious benefit to those fortunate enough to live in high-quality suburbs. They most often do not work where they live, and usually have automobile access to the business districts, recreational, and shopping areas of their cities. But for many of the poor, prohibiting commercial development in their neighborhoods has meant greater unemployment, or a longer journey to work, and greater difficulties and inconvenience in purchasing amenities.⁴⁴

EXCLUSIONS

Less noble sounding are the aspects of the law which have come to be known as “exclusionary zoning.” These are the clauses which specify minimum lot size of dwellings, which demand high quality structures, which, for example, disallow mobile and prefabricated homes. Although they also scrupulously avoid mention of the poor or minorities, it does not take a long chain of reasoning to see that these groups actually bear the brunt of this law. Leon Louw says in this regard:

Zoning laws usually limit the number of people who may occupy, or the amount of housing which may be built on, a given piece of land. The effect is that the poor, who could compete with the rich for prime land by pooling their money and living in higher densities, are precluded from doing so.⁴⁵

Nor are the poor and minorities taken in by the siren song of zoning. An analysis of a straw vote which rejected legislation in Houston indicates that the poorer and more heavily weighted black areas tended to oppose zoning, while the more affluent, exclusionary, and caucasian districts tended to favour it. For example, in an area on the east side of Houston designated “Negro” by the Houston Post, comprising 2/3 tenants and with a 95.3 percent vote for the Democrat in the gubernatorial election, 72.3 percent of the voters rejected zoning. In Sharpstown, an affluent area designated “almost all white” with virtually no tenants, which voted by a 74.3 percent margin for the Republican gubernatorial candidate, only 31.7 percent of the people voted against zoning.⁴⁶ Reports Bernard H. Seigan:

The predominant pattern of voting shows that high-income precincts (middle-middle to upper, inclusive) in the newer areas of the city generally supported zoning and that the lesser-income precincts (lower and lower-middle) in the older areas generally opposed it. In general, restricted areas wanted zoning, whereas unrestricted areas rejected it. … There was an exceedingly high correlation between the voter’s record in the straw vote and the voter’s economic status as indicated by median value of home owned or average monthly rental.⁴⁷

We must conclude, in the light of this evidence, that governments now enjoy an unmerited reputation for solving the problems of human rights and discrimination. On the contrary, affirmative action, EPFEW, and various anti-discrimination initiatives have backfired, harming the very minorities they were supposed to protect. Government programs such as minimum wage laws, anti-usury codes, rent controls, and zoning legislation have had unforeseen and negative consequences for the minority peoples, who have been among the greatest victims of discrimination.

_____________________

Originally appeared in Discrimination, Affirmative Action, and Equal Opportunity, ed. Walter Block and Michael A. Walker (Vancouver, British Columbia: Fraser Institute, 1982), pp. 101–25, notes pp. 240–51.

¹ See E. Franklin Frazier, The Negro in the United States (New York: Macmillan, 1957); E. Franklin Frazier, Negro Youth at the Crossways (New York: Schocken, 1967); Leslie H. Fishel, Jr., and Benjamin Quarles, eds., The Black American (Glenview, Ill.: Scott Foresman, 1967); Franz Fanon, The Wretched of the Earth (New York: Grove Press, 1963); Henrietta Buckmaster, Let My People Go (Boston: Beacon Press, 1969), pp. 103–04; Timothy Thomas Fortune, Black & White: Land, Labor, & Politics in the South (New York: Arno Press, 1969), pp. 30–31; Frances Fox Piven and Richard A. Cloward, Regulating the Poor (New York: Random House, 1971); William H. Grier and Price M. Cobbs, Black Rage (New York: Basic Books, 1968); Claude Brown, Manchild in the Promised Land (New York: New American Library, 1965).

² U.S. Department of Labor figures, Bureau of Labor Statistics, for 1948 and 1979. The figure of 33.5 percent is an underestimate of the real human tragedy, for it is based only on black teenagers who are “actively seeking work.” But there are workers who are discouraged after having failed to obtain employment and leave the labor force. These people are ignored in the unemployment figures!

There is a substantial body of information on the unemployment effects of the minimum wage law. For more information, see the following by Walter Williams: “Government Sanctioned Restraints that Reduce Economic Opportunities for Minorities,” Policy Review (Fall 1977): 1–24; Youth and Minority Unemployment, commissioned by the U.S. Congress, Joint Economic Committee, 95th Congress, 1st Session (Washington, D. C.: Government Printing Office, 1977); “The New Jim Crow Laws,” Reason (August 1978), pp. 16–23; “Minimum Wage Maximum Folly,” Newsweek (September 23, 1979), also in Wall Street Journal (September 13, 1979); “The Shameful Roots of Minority Unemployment,” Readers Digest (October 1979).

Also see Thomas Sowell, Race and Economics (New York: David McKay, 1975), pp. 184–86; Walter Block, Defending the Undefendable (New York: Fleet Press, 1976), pp. 227–36; Finis Welch, “Minimum Wage Legislation in the United States,” Economic Enquiry 12, no. 3 (September 1974): 258–318; Henry Hazlitt, Economics in One Lesson (New York: Harper & Row, 1946), chapter 18; Douglas K. Adie, “Teen-Age Unemployment and Real Federal Minimum Wages,” Journal of Political Economy 81, no. 2, part 2 (March–April 1973): 435–41; and Michael C. Lovell, “The Minimum Wage Reconsidered,” Western Economic Journal 11, no. 4 (December 1973): 529–37.

Further, see Frank G. Steindl, “The Appeal of Minimum Wage Laws and the Invisible Hand in Government,” Public Choice 14 (Spring 1973): 133–36; Frank G. Steindl, “More on Minimum Wages and Political Clout,” Public Choice 19 (Fall 1974): 137–38; Douglas K. Adie and Lowell Gallaway, “The Minimum Wage and Teenage Unemployment: A Comment,” Western Economic Journal 11, no. 4 (December 1973): 525–28; J. Houston McCulloch, “The Effect of a Minimum Wage Law in the Labour-Intensive Sector,” Canadian Journal of Economics 7, no. 2 (May 1974): 317–39; E. G. West, “Vote Earning versus Vote Losing Properties of Minimum Wage Laws,” Public Choice 19 (Fall 1974): 133–37; E. G. West and Michael McKee, Minimum Wages: The New Issues in Theory, Evidence, Policy, and Politics (Montreal: Economic Council of Canada and The Institute for Research on Public Policy, 1980).

³ See in this regard Toronto Globe and Mail (March 4, 1980), p. B2; also Toronto Globe and Mail (March 7, 1980); Murray N. Rothbard, Power and Market (Menlo Park, Calif.: Institute for Humane Studies, 1970), pp. 157-60; Alston v. School Board of City of Norfolk, 112F 2d 992 (4th Cir.), certiorari denied, 311 U.S. 693 (1940); Financial Post (May 15, 1980), p. 10.

⁴ The analogue of biology is compelling. “Mother nature” often grants otherwise weak organisms a saving grace which enables them to survive: the skunk has its smell, the deer fleetness of foot, the porcupine quills, the chameleon the ability to change its skin color to blend in with the environment, and so forth. It seems that “mother economics” has granted her weakest children (the ugly, the different, the scorned, the hated) a similar grace: this ability to be attractive to employers (and hence customers) despite all other drawbacks.

⁵ The government may then turn around and try to combat the rise in female unemployment (or unemployment) created by EPFEW. It may enact additional “equal opportunity” or “affirmative action” legislation enforcing hiring quotas on employers for women. If so, the felt need for such programs will have been brought about by its very own misguided EPFEW policies. As several of the essays in Walter Block and Michael A. Walker, eds., Affirmative Action and Equal Opportunity (Vancouver, British Columbia: Fraser Institute, 1982) make clear, this “cure” may actually be worse than the “disease.”

⁶ Leon Louw, “Free Enterprise and the South African Black” (address to Barclay’s Executive Women’s Club, Johannesburg, South Africa, July 31, 1980), p. 4.

⁷ James Buchanan, Cost & Choice (Chicago: Markham Publishing, 1969), especially pp. 47–48; G.F. Thirlby, “Subjective Theory of Value and Accounting Cost,” Economica 13 (February 1946): 32–49; Ludwig von Mises, Human Action, 3rd ed. (Chicago: Regnery, 1963), pp. 242, 395.

⁸ A female/male income ratio of 485 can be derived from Income Distributions by Size in Canada, 1979, Statistics Canada, Catalogue 13-207 (Ottawa: Statistics Canada, 1979), p. 99.

⁹ Ratna Ray, Women in the Labour Force: Facts and Figures, Catalogue L 38-30/1977-2 (Ottawa: Department of Labour, Women’s Bureau, 1977), page i. Other economic studies of interest in this regard include Alan S. Blinder, “Wage Discrimination: Reduced Form and Structural Estimates,” Journal of Human Resources 8 (1973): 436–55; Morley Gunderson “Male-Female Wage Differentials and the Impact of Equal Pay Legislation,” Review of Economics and Statistics 57 (1975): 462–70; Morley Gunderson, “Work Patterns,” in Opportunity for Choice: A Goal for Women in Canada, ed. G. Cook (Ottawa: Statistics Canada, 1976).

Morley Gunderson, “Time Patterns of Male-Female Wage Differentials,” Relations Industrielles/Industrial Relations 31 (1976): 57–71; R.A. Holmes, “Male-Female Earnings Differentials in Canada,” Journal of Human Resources 11 (1976): 109–17; Ronald Oaxaca, “Male-Female Wage Differentials in Urban

Labor Markets,” International Economic Review 14 (1973): 693–709; Roberta Edgecombe Robb, “Earnings Differentials Between Males and Females in Ontario, 1971,” The Canadian Journal of Economics 11, no. 2 (May 1978): 350–59; James E. Bennett and Pierre M. Loewe, Women in Business (Toronto: Financial Post Books, 1975).

Christina Maria Hill, “Women in the Canadian Economy,” in (Canada) Ltd.: The Political Economy of Dependency, ed. Robert M. Laxer (Toronto: McClelland and Stewart, 1973), pp. 84–106; Lynn McDonald, “Wages of Work: A Widening Gap Between Women and Men,” Canadian Forum (April/May 1975): 4–7; Neil MacLeod, “Female Earnings in Manufacturing: A Comparison with Male Earnings,” Statistics Canada, Notes on Labour Statistics, 1971 (Ottawa: Information Canada, 1972).

Sylvia Ostry, “The Female Worker: Labour Force and Occupational Trends,” in Changing Patterns in Women’s Employment: Report of a Consultation Held March 18, 1966 (Ottawa: Dept. of Labour Women’s Bureau, 1966), pp. 5–24, 25–31; Sylvia Ostry, The Female Worker in Canada, Dominion Bureau of Statistics Census Monograph (Ottawa: Queen’s Printer, 1968); Sylvia Ostry, “Labour Force Participation and Childbearing Status,” in Demography and Educational Planning, Conference on the Implications of Demographic Factors for Educational Planning and Research, ed. Betty MacLeod, Monograph Series, no. 7 (Toronto: Ontario Institute for Studies in Education, 1970), pp. 143–56.

R.A.H. Robson, “A Comparison of Men’s and Women’s Salaries in the Academic Profession,” Report to the Royal Commission on the Status of Women, C.A.U.T. Bulletin 17 (1969): 50–75; R.A.H. Robson and Mireille Lapointe, A Comparison of Men’s and Women’s Salaries and Employment Fringe Benefits in the Academic Profession, Canadian Association of University Teachers: Studies of the Royal Commission on the Status of Women in Canada, no. 1 (Ottawa: Information Canada, 1971); Gideon Rosenbluth, “The Structure of Academic Salaries in Canada,” C.A.U.T. Bulletin 15 (1967): 19–27.

¹⁰ The average age of all employed Canadian men was 37 years in 1980. This placed the typical man in the highest male earnings age bracket (35–44 years old). The average age of all employed Canadian women was 34 years in 1980. This placed the typical woman in the fourth highest male earnings age bracket (25–34 years old). See The Labour Force, Statistics Canada, Catalogue 71-001, (Ottawa: Statistics Canada, 1980), page 75; and Income Distributions by Size in Canada, 1979, Statistics Canada, Catalogue 13-207 (Ottawa: Statistics Canada, 1979), pp. 104–09.

¹¹ Occupational segregation such as shown in the table below cannot properly be interpreted as the result of employer discrimination. After all, the employer cannot hire a nurse as a doctor, nor a person with secretarial training as an engineer or accountant.

(1)  School years 1970–71 and 1977–78.

(2)  This information covers eight provinces of Canada, excluding Quebec and Ontario.

(3)  egistered nurses employed as nurses.

(4)  These figures are rough estimates of the breakdown by sex, and are for lawyers only.

(5)  Figures on all self-employed accountants unavailable in 1978. Registered membership list in 1978 of the Society of Management Accountants was used instead.

(6)  These figures are for engineers alone. Incomplete 1978 data on architects shows a breakdown by sex of 95 percent male, 4.1 percent female. Statistics for Ontario engineers in 1978 were unavailable; the 1981 count was used instead.

Sources: Earnings for self-employed doctors, dentists, lawyers and notaries, accountants, architects and engineers in 1971: Taxation Statistics, 1973 Edition: Analyzing the Returns of Individuals for the 1971 Taxation Year, Revenue Canada Taxation, Catalogue RV 44-1973(Ottawa: Revenue Canada, 1971), p. 13; in 1978: Taxation Statistics 1980 Edition: Analyzing the Returns of Individuals for the 1978 Taxation Year, Revenue Canada Taxation, Catalogue RV 44-1980 (Ottawa: Revenue Canada, 1971), p. 13; percentages of doctors, dentists, lawyers and notaries, accountants, architects and engineers by sex in 1971: Census of Canada 1971, Occupation by Sex for Canada & Provinces, Statistics Canada, Catalogue 94-717 (Ottawa: Statistics Canada, 1971), pp. 1–3; doctors and dentists in 1978: Health Information Division, Department of National Health and Welfare, unpublished statistics received from Revenue Canada Taxation, September 1980; lawyers: Demographic Survey, 1979 (Ottawa: Canadian Bar Association, Young Lawyers Section, 1979), p. 5; accountants: unpublished material from the Society of Management Accountants; engineers: unpublished material from the Canadian Council of Professional Engineers; architects: unpublished material from the Royal Architectural Institute of Canada; elementary school teachers’ earnings and percentages of elementary school teachers by sex in 1971: 1971 Census, Statistics Canada, Catalogue 94-717 (Ottawa: Statistics Canada, 1971), pp. 2–3, Table 2; in 1978: Salaries and Qualifications of Teachers in Public, Elementary, and Secondary Schools 1977, 1978, Statistics Canada, Catalogue 81-202 (Ottawa: Statistics Canada, 1978), p. 35, Table 2; university teachers’ earnings and percentages of university teachers by sex in 1971: Salaries and Qualifications of Teachers in Universities and Colleges, 1970, 1971, Statistics Canada, Catalogue 81-302 (Ottawa: Statistics Canada, 1971), p. 27, Table 1; in 1978: Teachers in Universities, Statistics Canada, Catalogue 81-241 (Ottawa: Statistics Canada, 1978), p. 27, Table 3; nurses’ earnings and percentages of nurses by sex in 1978: Nursing in Canada: Canadian Nursing Statistics, 1978, Catalogue 83-226 (Ottawa: Canadian Nurses Association, 1978), pp. 37, 96–98; Annual Salaries of Hospital Nursing Personnel, 1970, Statistics Canada, Catalogue 83-218 (Ottawa: Statistics Canada, 1971), pp. 18–20, Table 1.

The private employer will not, generally speaking, be able to occupationally segregate equally well-trained people on the basis of sex (or any other criteria). Were the employer to try to do so, he would set up profit opportunities which, when exploited, would forestall any such attempt at occupational segregation. (For a more complete explanation, see the analysis of discrimination against redheads—which applies to occupational segregation as well—in “The Plight of the Minority,” in Discrimination, Affirmative Action, and Equal Opportunity, ed. Walter Block and Michael A. Walker (Vancouver, British Columbia: Fraser Institute, 1982), pp. 9–11.

There are more plausible explanations for occupational segregation by sex than employer discrimination. These include differential ambitions, talents, tastes, attachments to the labor force, etc. A very interesting underlying explanation for all these phenomena is offered by Meredith M. Kimball, “Women and Success: A Basic Conflict?” in Women in Canada, ed. Marylee Stephenson (Don Mills, Ontario: General Publishing Co., 1978), p. 85, who says:

We found, as did Horner, that fear of success imagery increases between grade eight and grade twelve for girls. Homer also found an increase between the first and last years of college. Thus, in both high school and college years, fear of success is highest when women are making their most important occupational decisions. The last year of high school is when the decision to go to college is finally made, and if a woman decides not to go to college, then she must decide between marriage or occupation or some combination of both. In college, it is in the final year that decisions about graduate or professional school as well as kind of position must be made, again at a time that a woman often must also make a decision about marriage. It seems that it is not so much that women see no value in successful achievement, but rather that they see successful achievement as conflict-provoking, precisely because success is both desired and threatening. [emphasis added]

¹² In 1978, the percentage of female Canadian union members was 28.7 percent; males comprised 71.3 percent of the membership. Source: Corporations & Labour Unions Returns Act, Part II, Labour Unions, Statistics Canada, Catalogue 71-202, p. 41. On the question of male/female productivity differentials, see Jacob Mincer and Solomon Polachek, “Family Investments in Human Capital: Earnings of Women,” Journal of Political Economy 82, no. 2, part 2 (March 1974): 76–108.

¹³ In 1980, 94.1 percent of employed Canadian males worked full time, 5.9 percent worked part time; 76.2 percent of employed Canadian females worked full time, 23.8 percent worked part time. In 1979, 72.9 percent of employed Canadian males worked 50–52 weeks, 27.1 percent worked 1–49 weeks; 60.1 percent of Canadian females worked 50–52 weeks, 39.9 percent worked 1–49 weeks. Source: The Labour Force, Statistics Canada, December 1980, p. 105, Catalogue 71-001; Income Distributions by Size in Canada, 1979, Statistics Canada, Catalogue 13-207, p. 112.

¹⁴ These figures are derived from computations based on data cited for elementary school teachers’ earnings and percentages of teachers by sex: Salaries and Qualifications of Teachers in Public, Elementary & Secondary Schools, 1979–80, Statistics Canada, Catalogue 81-202, p. 25; university teachers’ earnings and percentages of university teachers by sex: Teachers in Universities, 1978–1979, Statistics Canada, Catalogue 81–241, p. 57. Note that while we have corrected the female/male income ratio for several phenomena not related to discrimination, a still more accurate assessment would have to normalize for all of these variables, together, and include other variables such as continuity of employment, earned degrees, labor force participation, location, industrial concentration, public or private employment, productivity, seniority, as well as such imponderables as motivation, “stick-to-it-iveness,” resourcefulness, ambition, expectations, etc.

¹⁵ Thomas Sowell, Affirmative Action: Reconsidered (Washington, D.C.: American Enterprise Institute, 1975), pp. 23–34.

¹⁶ Jesse Bernard, Academic Women (University Park: Pennsylvania State Univ. Press, 1964), pp. 220–26; Jesse Bernard, The Future of Motherhood (New York: Penguin Books, 1974), pp. 165–70; Bryan and Boring, American Psychologist 2 (January 1947): 18; Lee Rainwater, And the Poor Get Children (Chicago: Quadrangle Books, 1960), pp. 67–69; Wayne R. Bartz and Richard A. Rasor, Surviving With Kids (San Luis Obispo, Calif.: Impact, 1978), p. 147; Martin Meissner, “Sexual Division of Labour and Inequality: Labour and Leisure,” in Women in Canada, pp. 166–74; Nancy Chodorow, “Being and Doing: A Cross Cultural Examination of the Socialization of Males and Females,” in Women in Sexist Society, ed. Vivian Gornick and Barbara K. Moran (New York: Basic Books, 1971), pp. 183–84; Roslyn S. Willett, “Working in ‘A Man’s World’: The Woman Executive,” in Women in Sexist Society, p. 368; Jean Tepperman, “Two Jobs: Women Who Work in Factories,” in Sisterhood is Powerful, ed. Robin Morgan (New York: Random House, 1970), pp. 115, 121.

¹⁷ Gail C.A. Cook, “Opportunity for Choice: A Criterion,” in Opportunity for Choice: A Goal for Women in Canada, ed. Gail C.A. Cook (Ottawa: Statistics Canada and C.D. Howe Research Institute), Catalogue IC 23-15/1976, p. 4; Gail C.A. Cook and Mary Eberts, “Policies Affecting Work,” in Opportunity for Choice, p. 145; Richard A. Lester, Antibias Regulations of Universities (New York: McGraw-Hill, 1974), p. 39; Willett, “Working in ‘A Man’s World’,” p. 368; Pat Mainardi, “The Politics of Housework,” in Sisterhood Is Powerful, pp. 447–54; Jesse Bernard, The Future of Motherhood, pp. 157–65; Kathryn E. Walker, “Time Used by Husbands for Household Work,” Family Economics Review (June 1970): 8–10; M. Meisner, E.W. Humphries, S.M. Meis, and W.J. Scheu, “No Exit for Wives: Sexual Division of Labour and the Cumulation of Household Demands,” Canadian Review of Sociology and Anthropology 12 (1975): 424–39.

¹⁸ Barbara B. Reagan, “Two Supply Curves for Economists? Implications of Mobility and Career Attachment of Women,” American Economic Review 65, no. 2 (1975): 102; Jacquelyn S. Crawford, Women in Middle Management (Ridgewood, N.J.: Forkner, 1977), p. 63.

¹⁹ E.W. Burgess and Paul Wallin, Engagement and Marriage (New York: Lippincott, 1953), pp. 614, 618; and Reagan, “Two Supply Curves,” p. 104. See also Beth Neimi, “The Female-Male Differential in Unemployment Rates,” Industrial and Labour Relations Review 27, no. 3 (April 1974): 331–50.

²⁰ Alan E. Bayer, “Marriage Plans and Educational Aspirations,” American Journal of Sociology 75 (1969): 239–44; Reagan, “Two Supply Curves,” p. 103; Bernard, The Future of Motherhood, pp. 91, 151, 181; Jean Tepperman, “Two Jobs,” p. 123; Betty Friedan, The Feminine Mystique (New York: Dell, 1974), p. 31; Meg Luxton, More Than a Labour of Love: Three Generations of Women’s Work in the Home (Toronto: Women’s Educational Press, 1980), p. 16; Margaret Luxton, “Urban Communes and Co-ops in Toronto,” (M. Phil. dissertation, University of Toronto, 1973), cited in Luxton, More Than a Labour of Love; Ann Oakley, Women’s Work: The Housewife Past and Present (New York: Vintage Books, 1976); Eli Zaretsky, Capitalism, The Family, and Personal Life (New York: Harper & Row, 1976), p. 17; Simone de Beauvoir, The Second Sex (New York: Vintage Books, 1974), p. 482.

²¹ Let us imagine an experiment. We offer a large number of employed married couples the following option: jobs in city A, where the husband will earn $200,000 per year and the wife $150,000, or in city B, where the wife will earn $200,000 per year, and the husband $150,000. (The type of employment and the amenities of the cities are assumed to be identical in each case.) How many of the husbands would prefer city B? How many wives would prefer city A? Although there is only casual evidence on this, since such an experiment has not yet been done, one may speculate that there will be more wives who will prefer city A than there will be husbands who will prefer city B. The motivations behind these choices may vary. Some husbands may feel “less of a man” if their wives earn more than they do; others may feel it is just “not fitting” that their incomes should be lower; some wives may feel less damaged psychologically from earning less than their spouses; others may subscribe to the societal pressures which teach, at a young age, that “nice girls don’t outcompete boys.” But whatever the reason, there is abundant anecdotal evidence that many women have great psychological and other personal difficulties in competing with men, and are thus, when married, more likely than men to purposefully keep their earnings below those of their spouses—with important implications for the low female/male earnings ratios for married people.

See, for example, Bernard, Academic Women, p. 216, who speaks of “a determined effort” on the part of academic women “not to outshine [their] husband[s]”; Vivian Gorlick, “Why Women Fear Success,” in Essays in Feminism (New York: Harper & Row, 1978), p. 87, who reports the typical response of a woman who “deliberately lower[s] her academic standing … while she does all she subtly can to help [her future husband]”; Dorothy Jongeward and Dru Scott, Women as Winners (London: Addison-Wesley, 1976), p. 15, who cites the following woman’s statement about her and her husband as typical: “I would never take a job where I earned more than Bob. If I start being really successful, that means I’m making him less of a man”; Betty Friedan, The Feminist Mystique, pp. 29, 30, who discusses the contents of an early 1960s issue of McCalls, “the fastest growing of the women’s magazines,” which, in her opinion, “are a fairly accurate representation of the image of the American woman.” The article in question describes a “nineteen-year-old girl sent to charm school to learn how to bat her eyelashes and lose at tennis” (emphasis added) by never “volleying to the backhand of male opponents.” Betty Friedan also relates how she herself, as a young woman, gave up a graduate fellowship to study for a doctorate, upon being told by her male companion that “Nothing can come of this, between us. I’ll never win a fellowship like yours” (pp. 62–63); Judith M. Bardwick and Elizabeth Douvan, “Ambivalence: The Socialization of Women,” in Women in Sexist Society, p. 150, who discuss social pressures which interfere with pubescent girls’ successfully competing against boys; Mary Ann Zasylycia-Coe, “Canadian Chief Librarians by Sex,” Canadian Library Journal 38, no. 3 (June 1981): 162, who points to the lower marriage rate of female than male chief librarians, and states, “this would seem to indicate that more females than males perceive marriage and a high level position as incompatible”; Margaret Hennig and Anne Jardim, The Managerial Women (New York: Simon & Schuster, 1976), p. 23, who cite the difficulties undergone by women students in participating in the case study method at the Harvard MBA program, and attributes this, in part, to “their own doubts as to whether they could or even wanted to compete with the men in the class (emphasis added); Meredith M. Kimball, “Women and Success: A Basic Conflict?” in Women in Canada, pp. 73, 74, who tells us that “girls are socialized, especially from early adolescence on, to see achievement as unfeminine … success for women has negative as well as positive value.”

See also M.S. Horner, “Fail: Bright Women,” Psychology Today 3 (November 1969): 36; M.S. Horner, “Femininity and Successful Achievement: A Basic Inconsistency,” in Feminine Personality and Conflict, ed. J.M. Bardwick et al. (Belmont, Calif.: Wadsworth, 1970), p. 60; M.S. Horner, “Sex Differences in Achievement Motivation and Performance in Competitive and Non-Competitive Situations,” Ph.D. diss., University of Michigan, 1968, cited in Meredith M. Kimball, “Women and Success: A Basic Conflict?” p. 89; Roslyn S. Willett, “Working in ‘A Man’s World’,” p. 369; and Jacquelyn S. Crawford, Women in Middle Management, pp. 63–65. See also Psychology of Women, ed. Juanita H. Williams (New York: W.W. Norton, 1979), esp. Lisa A. Serbin and K. Daniel O’Leary, “How Nursery Schools Teach Girls to Shut Up,” pp. 183–87; Grace K. Baruch and Rosalind C. Barnett, “Implications and Applications of Recent Research on Feminine Development,” pp. 188–99; and Julia A. Sherman, “Social Values, Femininity, and the Development of Female Competence,” pp. 200–11. In addition, see V. O’Leary, “Some Attitudinal Barriers to Occupational Aspirations in Women,” Psychological Bulletin 81 (1974): 809–26; A. H. Stein and M. Bailey, “The Socialization of Achievement Motivation in Females,” Psychological Bulletin 80 (1973): 345–66; Juliet Mitchell, Woman’s Estate (New York: Vintage Books, 1973), pp. 124–29; Simone de Beauvoir, The Second Sex, pp. 368–72.

Many of these inferences about income-earning capacities apply, of course, to never-married women as well as to ever-married women. That never-married women have nevertheless been able to register at 992 income ratio with their male counterparts, despite these obstacles, is all the more evidence of their great earning capacity. True, never-married women have slightly higher educational preparations than never-married men (10.9 vs. 9.3 years—see Kuch and Haessel, cited in Table 3). But it is unlikely that this slight advantage would more than offset all the other psychological and sociological disadvantages to their income-earning ability.

²² Unfortunately, only the “married” and “total” columns are widely published in official Canadian Statistics. To say the least, this gives rather a biased account of the true state of the female/male earnings ratio, and its basic cause (marital status and its widely diverging effects on male and female earnings).

²³ Not only does marriage have asymmetrical effects on earnings by sex, but it is reasonable to believe that so does “living together” or “cohabitation”—and for similar reasons. Moreover, this category has become more statistically significant in recent years, though actual data are lacking. Table 3, in distinguishing between the ever married and the never married, cannot separate those who have ever lived together—whether married or unmarried—from those who have never lived together. If cohabitation as well as ever-married status could be controlled for, one would thus expect the female/male ratio to be higher than 992. There is also, however, a reason for believing that 992 may be somewhat of an overestimate of the “true” female/male earnings ratio: never-married females are older than never-married males (46.2 years vs. 43.7 years old), have more schooling (10.9 vs. 9.3 years), work more weeks (45.6 vs. 42.3 weeks), and work on a part-time basis to a lesser degree (10.6 percent vs. 11.8 percent). (All figures based on calculations made from data presented by Kuch and Haessel; see Table 3 for full citation.)

²⁴ Some may argue that private discriminatory behavior is immoral and ought to be prohibited by force of law. Others may hold that, while discrimination is a negative characteristic, each individual is nevertheless entitled to make whatever decision suits his conscience—whether in commercial dealings, employment practices, housing decisions, or personal relations—provided only that he not commit fraud upon, or initiate aggression against, minority group members. Whatever the solution to this philosophical question, both sides may perhaps take comfort from one of the findings in Block and Walker, Discrimination, Affirmative Action, and Equal Opportunity: the tendency of the marketplace to financially penalize those who indulge in discriminatory practices, and thus to reduce, over time, the scope of this activity.

²⁵ There would appear to be numerous criteria upon which discrimination has, or is alleged to have, taken place, and upon which quotas, affirmative action, or preferential treatment are now demanded. Some of the grounds include (1) obesity: see “Obese Are Victims of Bias: Professor,” Toronto Globe & Mail (August 5, 1980), p. 13; (2) blindness: see “Group for Blind Suggests Job Quota,” Toronto Globe & Mail (August 2l, 1980), p. 1, and “Blind Woman and Guide Dog Win Rights Fight,” Vancouver Sun (August 18, 1980), p. 8; (3) residence: see “Stop Provinces Reserving Jobs for Residents, Rights Chief Says,” Toronto Globe & Mail (June 4, 1980), p. 10; (4) “reverse” discrimination: see “Barring White in Native Class Is Ruled Illegal,” Toronto Globe & Mail (February 13, 1980), which tells of an Alberta Human Rights Commission finding against the University of Calgary for discriminating against a non-Indian woman by denying her admission to a special course specifically set up for native peoples; (5) ugliness: see “More to an Interview than Meets the Eye,” Toronto Globe & Mail (July 19, 1980), p. F3, which shows that persons of “unattractive appearance” (and even sometimes persons of beauty) are discriminated against in hiring practices; (6) political beliefs: see “They’re Biting the Hand that Won’t Feed Them,” Toronto Globe & Mail (August 9, 1980), p. 8, which tells of a Prince Edward Island Provincial Human Rights Commission finding that a public employee had been wrongfully dismissed for his political beliefs; (7) hirsuteness: see “Supreme Court Refuses a Motion to Force Grocery Clerk to Shave,” Toronto Globe & Mail (February 10, 1980), which tells of a Winnipeg employer who could not legally compel his grocery clerk to either shave his beard, work nights “out of the sight of customers,” or fire him.

²⁶ The situation with regard to discriminatory practices on the part of the government is a unique matter. It cannot be argued, as it could in the private case, that, no matter how morally reprehensible discrimination is, at least in the market sector it is done by an individual in his own name and with his own money.

When the government discriminates, it does so on all our behalf, and, adding insult to injury, with all our money, including that of the very persons who must bear the brunt of this practice. There can be few things more outrageous and galling than first forcing a minority group member to pay taxes for a public institution, and then allowing the public institution to turn around and refuse to hire or serve members of that very group.

In contrast, there is no such phenomenon in the private sector. If A discriminates against B in the marketplace, he at least does it with his own (A’s) money; he does not first force B to contribute to his (A’s) bank account and then turn around and use his money (B’s) against him. It is even possible to make out a case for the non-criminal status—if not the outright morality—of private discrimination. Such behavior in the private sphere, it might be claimed, amounts to no more than a refusal to interact with another person. And the right to privacy would seem to justify the decision of one individual not to be involved with another. Such a case could hardly be made on behalf of government discrimination, however.

²⁷ Although many people interpret prejudice or discriminatory behavior as a willingness to engage in physical aggression against a despised person or group, this interpretation is about as far away as it is possible to get from a clear understanding. On the contrary, a sharp distinction must be made between refusing to interact at all with a person, and threatening physical abuse against him. The former is all that is done by a hermit, although on a larger scale; and if it is no crime to refuse to deal with all of humanity, then it might be argued that it can scarcely be a rights violation to avoid dealing with only some people.

Physical abuse, in contrast, is the act of a criminal; it is what murder, kidnapping, extortion, and assault and battery all have in common. It is altogether different, in this view, from a mere refusal to interact with (some of) humanity.

Exception must be taken, then, to William Johnson’s claim of a “continuity between getting upset about French on corn flake boxes [objecting to a law which compels bilingualism on commercial products] and attacking innocent campers” (several young Francophones, from Quebec, working in British Columbia were viciously beaten by local hoodlums who uttered racist epithets). See Toronto Globe & Mail (July 15, 1980), p. 8. While some who engage in the former may engage in the latter as well, there is the world of difference between these two activities, and no necessary connection between them. “Getting upset,” moreover, is a right of all citizens in a free country, while physically attacking innocent people is, and should always be, a crime, severely punishable to the full extent of the law.

²⁸ Ludwig von Mises, Human Action, p. 109.

²⁹ Toronto Globe & Mail (April 14, 1980), p. 6. See also Toronto Globe & Mail (January 25, 1980).

³⁰ See “Drea Tells Firm to Stop Questions” and the editorial “Wearing Nothing but a Seat Belt,” both in Toronto Globe & Mail (July 31, 1980), pp. 5, 6.

³¹ These agencies include the Federal Reserve Board, the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Federal Home Loan Bank Board, and the National Credit Union Administration.

³² Wall Street Journal (June 22, 1978). On age bias, see also Toronto Globe & Mail (February 18, 1980), p. 5.

³³ They cannot. Loansharks, black marketeers, usurers, and underworld lenders have not been driven out of business. With age-affirmative action for legitimate concerns, these alternatives would be given a new lease on life.

³⁴ Toronto Globe & Mail (September 14, 1979).

³⁵ Toronto Globe & Mail (July 1, 1980), p. 12.

³⁶ Ralph Keyes, The Height of Your Life (Boston: Little, Brown & Co., 1980). Also Toronto Globe & Mail (July 10, 1980), p. 15.

³⁷ Toronto Globe & Mail (March 26, 1980), pp. 5, 8.

³⁸ True, laws can be passed prohibiting this latter alternative, but they are hard to police. Even if such a law decreases discriminatory activity on the basis of race, it is not likely to succeed. Government will have first unleashed a bout of discrimination upon the private sector, through its unwise rent control law, and only then have attempted to eradicate it. The net result will inevitably be an increase in discrimination compared to the situation in which government did not act at all. The government will, of course, take credit for its (secondary) efforts in “solving” the problem. It will be the rare individual who can follow the somewhat complex chain of reasoning necessary to see the government’s true role. Anti-tenant-discrimination legislation, moreover, will have unintended negative consequences similar to those created by affirmative action programs.

³⁹ For an account of landlord discrimination, under rent control, against: (1) families with children, see “Choosey Landlords Targets of Council,” Vancouver Sun (September 24, 1980), p. A8; (2) male college students, see “Report Biased Landlords, Male Students Are Urged,” and “Preferred,” Toronto Globe & Mail (August 18, 1980), p. 9, 6; (3) the handicapped, see “Landlords Won’t Rent to Man in Wheelchair,” Vancouver Sun (October 25, 1980), p. A3, and “Landlords Close Doors to Thalidomide Victim: Deformity Makes Her an Unwanted Tenant,” Vancouver Sun (January 14, 1981), p. B1. Whether these landlords are allegedly discriminating on their own account, or in behalf of tenants, however, is by no means clear.

⁴⁰ Laws which make it more difficult for legitimate lenders to legally repossess their funds upon default of the loan have a similar effect.

⁴¹ Louw, “Free Enterprise and the South African Black,” p. 3.

⁴² According to anecdotal evidence, interest charges demanded (and received!) by loan sharks varies from 2 percent to 5 percent to 20 percent per week, depending on the time period of the loan, and the creditworthiness of the borrower. See in this regard “Joey,” with Dave Fisher, Killer: Autobiography of a Mafia Hit Man (New York: Simon and Schuster, Pocket Book, 1974), p. 86.

⁴³ See Walter Block, ed., Zoning: Its Costs and Relevance for the 1980s (Vancouver, British Columbia: The Fraser Institute, 1980).

⁴⁴ The truth seems to be that the juxtaposition of many supposed “incompatible uses” is perceived by some as a benefit but by others as a harm. See Block, Zoning, pp. 35, 36.

⁴⁵ Louw, “Free Enterprise and the South African Black,” p. 3

⁴⁶ Bernard H. Seigan, Land Use Without Zoning (Toronto: Lexington Books, 1972), p. 29.

⁴⁷ Seigen, Land Use Without Zoning. This does not imply, of course, that each voter does an intensive cost-benefit analysis of the effect of such legislation on his or her pocketbook. But it does indicate a rough way that people correctly perceive their self-interest in zoning.