Equal Pay for Unequal Work
28 August 2024
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In the Media
In the Media
Markets and Morality
Len Shackleton writes for CapX
IEA Editorial and Research Fellow Len Shackleton has reacted to the recent judgement against Next in an employment tribunal over equal pay, arguing that the ruling harms workers and the economy.
Len wrote:
“These cases arise because in 1983 we brought in regulations to implement the EU’s Equal Pay Directive, which extended the principle of equal pay between men and women to include not only identical work but also doing work ‘of equal value’.
“In job evaluation schemes, there is little or no role for market forces – the idea, for example, that Next might face a scarcity of warehouse workers and an abundance of applicants for shop assistants – which you might think could justify pay differentials.
“A free market would tend to produce ‘compensating differentials’ – economists’ jargon for extra pay for often intangible differences in the attractiveness of jobs. But current law suppresses this. A predictable consequence of a rigid application of such rules is that labour shortages tend to persist and the labour market works less well. And, as in the Asda case, you look to replace newly-expensive counter staff with self-service check-outs.
“This is likely to flatten pay structures, reduce economically justified differentials (and also, incidentally, performance-related pay, already a minefield for employers) and make the labour market work less effectively. It will distract management from focusing on increasing productivity, which is the only way in which the pie over which groups are fighting will ever grow appreciably.”
You can read Len’s full piece here.
Len wrote:
“These cases arise because in 1983 we brought in regulations to implement the EU’s Equal Pay Directive, which extended the principle of equal pay between men and women to include not only identical work but also doing work ‘of equal value’.
“In job evaluation schemes, there is little or no role for market forces – the idea, for example, that Next might face a scarcity of warehouse workers and an abundance of applicants for shop assistants – which you might think could justify pay differentials.
“A free market would tend to produce ‘compensating differentials’ – economists’ jargon for extra pay for often intangible differences in the attractiveness of jobs. But current law suppresses this. A predictable consequence of a rigid application of such rules is that labour shortages tend to persist and the labour market works less well. And, as in the Asda case, you look to replace newly-expensive counter staff with self-service check-outs.
“This is likely to flatten pay structures, reduce economically justified differentials (and also, incidentally, performance-related pay, already a minefield for employers) and make the labour market work less effectively. It will distract management from focusing on increasing productivity, which is the only way in which the pie over which groups are fighting will ever grow appreciably.”
You can read Len’s full piece here.
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