EVERYWHERE, PEOPLE ARE WAKING UP TO THE IDEA THAT SOCIAL engineering, central planning, and socialist measures in general are bad ideas. The best means to achieve peace, prosperity, and economic progress is a greater reliance on the price and profit system.
But there is still some of this socialist philosophy underlying Arthur Drache’s recent Financial Post columns (March 15, April 11). These essays, which call for government pay boards, have attempted to undermine the marketplace at its most vulnerable point—its system of free and flexible wages and prices. He has done so in criticism of my own attempts to explicate and defend the price mechanism (Commentary, March 9 and 28) from those who urge wage controls under the guise of “pay equity.”
Let us make no mistake about it: without market-generated wages and prices, there can be no free enterprise system.
By subjecting wages to centralized control to promote pay “equity,” all prices would be grievously affected. But prices have a crucial role to play in the economy. The price system is the means through which the market does its planning. In the absence of central direction of the economy, uncontrolled prices provide information about shortages and surpluses. Only free prices can impart incentives to market participants to cure these misallocations.
It would be bad enough were Drache to advocate increased government ownership of Crown corporations, rent controls, marketing boards, and tariffs, which are each limited to specific sectors of the economy. Legislation mandating equal pay for equal or equivalent work, in contrast, reaches into every nook and cranny of commercial life.
Such legislation could only be approached by a full-blown and permanent program of wage and price controls, which could spell the death of the economy.
It would be bad enough if there were a case for intervention on the basis of principles of justice. But the gap between male and female rates of pay is not caused by employer discrimination. On the contrary, the cause of this gap is the unequal attachment to the labor force of husbands and wives.
Fraser Institute research based on data compiled by StatsCan shows that the earnings of males and females who have never been married are indistinguishable.
Nor will his penchant for throwing money at problems without understanding them suffice. Public day care, another of Drache’s pet projects, will only further erode the institution of the family. In any case, this program can hardly buttress the income of women without children.
As for reform of divorce laws and property settlements, this is long overdue. But the injustice here results from government failure, not to any problem with markets.
Fortunately, there are feminist groups in Canada which have not jumped on the equal pay bandwagon, and are, instead, attempting to reform divorce law, and to deal with the problem of the father who runs out on his child support payments. They are Real Women, Family Forum, and the Society for Children’s Rights to Adequate Parental Support.
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The Financial Post (Ontario, Canada), April 26, 1989.