Labour Market

Pay gaps and the limits of central planning (Part 1)


Housing and Planning
Government and Institutions
‘Equal Pay Day’ has passed – thankfully, without the media frenzy which usually attends this non-event. Much of it, I suspect, is down to the stellar work of colleagues like Kate Andrews and others who have so effectively torn apart the shaky logic behind the Fawcett Society’s claims.

Readers may be familiar with the Equal Pay Day campaign and its use of statistics, which look at best, deeply misleading. Rather than rehashing these arguments here, I’d like to question some of the logic underlying the ongoing ‘gender pay’ crusade.

I fear we may be taking a rather two-dimensional view of the gender pay gap, giving little credence to personal choice and rather too much to the effectiveness of central planning.

Feminist campaigners usually attribute gender wage differentials to a combination of discrimination and societal conditioning. Even if women apparently ‘choose’ to exit the workforce to care for children, many argue these decisions weren’t freely made, citing the persistence of traditional gender roles and male reluctance to shoulder caring responsibilities.

Our focus on measuring and attempting to narrow the gender pay gap both perpetuates and hinges on an understanding of a ‘gap-free’ society as innately desirable. It’s hard not to sympathise with this view. Female representation and equality of opportunity matter. Many free marketeers have rightly urged a rethink of existing obstacles to female participation and advancement in the workforce – e.g. by addressing the exorbitant cost of childcare in the UK (much of which results from excessive state interference in the first place).

Reducing obstacles and distortions is one thing, but given the available evidence about gendered preferences and patterns of behaviour, we should be wary of attempts to intervene further. After all, just imagine what a society engineered towards complete pay parity would look like. As the IEA’s Editorial Fellow Len Shackleton notes, both sexes would have to be making, on average, identical decisions.

For the gender pay gap to disappear, he writes: “Men and women would need to have the same qualifications, in the same subjects, be employed in the same types of occupations in the same type of firms, have the same preferences between paid work and home work, share domestic tasks equally and take the same amount of time out of the workforce, have the same career plans and expectations, value the same attributes of jobs, take the same amount of time travelling to work and so on.”

Attempting to remove the gender pay gap through government policy would require such dramatic state intervention that individual choice would inevitably suffer as a result. And if recent policy history is anything to go by, such interventions might well have the opposite of their intended effect.

Take Sweden, a nation which has historically worked tirelessly to promote gender equality.

Back in 1974, Sweden became the first country in the world to introduce gender-neutral parental leave. At the time, couples received six months’ leave per child, with each parent entitled to half the days. However, men had the option of signing their days over to the women – and most of them did. By the mid-1990s, women were still using, on average, 90% of the leave days.

Today, Swedish couples accrue around 16 months (480 days) paid parental leave, which they can take anytime until their child’s seventh birthday. In recent years, the government has gone even further, actively stipulating that fathers must use at least 60 days’ leave for their families to qualify for full parental subsidies. Yet despite complete flexibility, and quasi-mandatory paternity leave, Swedish women are still taking, on average, more than 80% of the shared leave while their first child is under the age of two. They are also more likely to work part-time and take longer periods of unpaid leave. In Denmark and Finland, which offer similar incentives, men take less than 9% of overall leave. Short of major state coercion, it’s not clear what more these countries could do to encourage men to take time off.

These trends are borne out in the UK as well, where more than 80% of English fathers still work full time, rising to almost 85% for dads of babies and toddlers – a rate which has barely moved over the last 20 years. Earlier this year, it was revealed that just 2% of eligible UK couples have opted to take advantage of the joint parental leave scheme introduced by former LibDem leader Nick Clegg under the coalition government.

Funnily enough, individuals don’t always behave as the central planners would have them do.

Read Part 2 here.

Madeline is the IEA’s Editorial Manager, responsible for commissioning and running the IEA blog, and creating content for the IEA podcast channel and other media outlets. Prior to joining the Institute, she worked as a Parliamentary researcher and speechwriter, and as a reporter for Newsweek Magazine. Madeline graduated from St Hilda’s College, Oxford in 2014, with a degree in English. As an undergraduate, Madeline was actively involved in university politics, and was elected to Standing Committee of the Oxford Union during her studies.

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