THE ADVOCATES OF EQUAL PAY FOR WORK OF EQUAL VALUE castigate the market for its inherent unfairness. Instead of the “anarchy” of free enterprise, they propose that all wages be set on the basis of skill, effort, responsibility, and working conditions.
These would be determined by boards of “experts,” and tribunals of bureaucrats and civil servants, who substitute their “objective” assessments for the chaotic judgment of a system of competitive labor markets.
There are many and serious objections which can be leveled against such a system. Perhaps most important, the entire proposal is predicated upon a male-female wage “gap” resulting from employer discrimination. But as Fraser Institute research has shown, no such phenomenon actually exists.
As well, contrary to the self-styled feminists, there is nothing intrinsic in a job that makes it worthy of compensation. Crucial in any determination of wage rates is the demand on the part of consumers for the service supplied.
Right now, for example, the skill, effort, responsibility, and working conditions of dentists are such that they receive high compensation. But were a cure for tooth decay to be uncovered tomorrow, their wages would plummet without any discrimination whatsoever in these objective measurements of the performance of dentists.
Further, any proposal that artificially raises the salaries of a given calling beyond its productivity level threatens it with unemployment. But equal pay enactments are always couched in terms of raising female incomes, never reducing those of males.
As such, they threaten to price women out of the market, in a manner similar to what has already happened to young people, who have been rendered less employable by minimum wage laws.
There is also the embarrassment that when boards or tribunals in the different jurisdictions have attempted to “objectively” set the value of a job, the results have varied widely. When entrepreneurs poorly estimate the worth of a job, they are automatically penalized. If they set wages too high, they risk bankruptcy; too low and they are likely to suffer severe quit rates.
Unfortunately, no such automatic reward and penalty device can operate in the public sector.
Equal pay legislation is a form of wage/price control. As such, wages are frozen in place, despite changing market conditions. For example, if there is a sudden need for more nurses, and fewer firemen, an inflexible wage system will be unable to encourage the former, and discourage the latter.
A decade ago, Canada rashly experimented with wage/price controls. It was a disaster. That we are seriously flirting with this unsavory idea so soon after underscores the point that those who are ignorant of history are doomed to repeat the mistakes of the past.
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The Financial Post (Ontario, Canada), Thursday May 5, 1988.