Wednesday, June 17, 2015

Equal Pay for Equal Work is Incompatible with Free Market Capitalism

The buzz phrase “Equal pay for equal work” is most commonly associated with the so called ‘gender wage gap,’ that women are getting paid less for the same work. While there may be a small gap due to discrimination, it is certainly not the 77% number that is often cited by mainstream reporting. But that is not the biggest problem with the issue of the phrase “equal pay for equal work.” The real problem with this phrase is that it is in fact regressive. If we truly embrace this philosophy, then it will be essentially impossible to progress, either technologically or socially.

Economic and technological progress hinges on the exact opposite idea: do the same work for less pay. Even better, many do better work for less pay. This is the nature of economic and technological competition. Technological progress strives to lower prices, producing the same goods at a lower price point. The winners are the ones who provide what consumers think is the best product for the lowest price. Cutting the price for the same product, or a superior product requires paying less for all the accumulated labor that produced the product. This is essentially less pay for equal work.  
Perhaps this is a misunderstanding of the phrase. What if we use another conception of the phrase? Let us examine equal pay for equal output, equal pay for equal effort, and equal pay for equal time worked.
  • Equal pay for equal output: This is the most reasonable interpretation in my opinion, but even in this case ‘equal pay for equal work’ is wrong. In this interpretation, the price of products could never fall, since we can consider the product to be the output. If equal output must be paid the same rate across the market, then computers would in fact be more expensive that the first computers, since they do so much more.
  • Equal pay for equal effort: We can consider this to be in some sense to be equal sweat equity for equal pay. This is also wrong, because just because someone works really hard doesn’t mean that their effort is valuable. If we have two people who dig ditches and move the dirt to a more useful location (landscaping or something), and one of them puts the dirt in the wrong location that is just as far away, I think we can see that they have both put in equal effort. One put the dirt in the right location, while the other did not. Clearly, the one who put the dirt in the wrong location should not be paid the same amount as the one who put it in the right location. If we required equal pay for equal effort, we would be forced to pay misdirected effort the same as good effort, which is clearly wrong.
  • Equal pay for equal time: This is clearly ridiculous, as if we had to pay equally for equal time, hourly salaries would be the same for every profession ever, where clearly some are worth more than others. Someone who can build a twice as fast as someone else should clearly not be paid half as much for the same house (and faster too).

These objections might seem trivial, but they demonstrate the significant problems with the mantra ‘equal pay for equal work’ even if we can clearly define what equal work actually means.

Capitalism, by which I mean the free market, works by allowing the competition of people to accept lower pay for equal work; by giving people the freedom to provide services for cheaper than other people.