March 26, 2015

Horse 1865 - Covering Callousness In the Name of "Lifestyle Choices"

Individuals have fairly extensive choice over the quantity and quality of education, skills, and work-relevant experiences they accumulate, and this human capital investment has a major bearing on observed wages earned by women and men.
Studies show that Australian girls generally perform better than boys at school, but tend to prefer enrolling in humanities tertiary courses, which subsequently pay relatively lower wages in employment, rather than the sciences, which offer higher career wages.
It generally appears that women tend to assume working roles which provide more pleasant and safe conditions, and which provide greater flexibility for part-time work to accommodate family responsibilities.
- Dr Mikayla Novak, Senior Research Fellow, IPA, in The Age 8th Mar 2015¹

I'm becoming increasingly convinced that the words "lifestyle choices" are code words in the same style as "work choices" and have roughly the same meaning - that is, "we are justifying apathy coupled with cruelty".

This article by Dr Mikayla Novak, Senior Research Fellow at the IPA sounds on the face of it, completely logical. However the implications of the article are about blame shifting and the necessary apathy which must follow as a result of that blame shifting.
Firstly the premise of this piece suggests that it is mostly down to women's choices that they happen to get lower paid jobs than men. Those choices I'm assuming include such issues as raising children and choosing jobs which are more altruistic in nature. Since it is being suggested that the price of wages is or should be determined by the market, which is unquestioningly taken as being utterly virtuous and efficient, then the prices which result from the operation of the market are also unquestioningly taken as being utterly virtuous and efficient.
Speaking as a white male, aged between 25-65 I am perfectly qualified to speak about women's "lifestyle choices" and how that relates to wage pricing because I'm not  personally affected by the issue inasmuch as I am not a woman and therefore will never suffer the shortfall in earnings as a result of those choices. Not only am I not remotely affected by women's "lifestyle choices" and how that relates to wage pricing but people like me who happen to make up the other side of that market place are also not remotely affected by the outcome of the issue; as a result, they generally do not care about those outcomes which arise as the result of "lifestyle choices". If you look at the ratio of who was fighting for equal pay for women and who is currently advocating higher wages for women, I wager that less than 1% of those people are men.

The goal of business is to make a profit. Profit is generated by selling goods and services at higher prices than the input costs which are required to produce those goods and services. People who own businesses and make decisions which relate to the profitability of a business can achieve greater profitability in one of two ways.
1. They can adjust the selling price of their goods and services so that they sell more by volume.
2. They can adjust their input costs so that on a per item basis, those costs are less.
It must be remembered though that Wages are an input cost. For more information please reread these two dot points.

Whilst markets are incredibly efficient, the only outcome which markets are capable of delivering is one based on price. Markets are amorally and apathetically concerned with how that price is achieved. In a perfect theoretical market, it is assumed that all Suppliers and Demanders have equal power and equal information on entering the market. This actually isn't true in the real world. In virtually every market which exists in the real world, there are price takers and price makers and both of these groups have varying levels of market power.
Businesses and firms who are Demanders in the market for labour, are generally able to exert more market power than Suppliers. The problem with a labour market though, is that the suppliers of labour are employees. The motivation for an employee is different to that of the business. As an employee is a labour supplier, their wage is an input cost to the business. Businesses whose motivation is to return a profit to their owners, would prefer to reduce those input costs as much as they possibly can (and to zero if they can possibly get away with it).

Here's the rub. If you've made the "lifestyle choice" to be born as a female, then you probably are born with a greater sense of family, community and altruism than if you'd made the "lifestyle choice" to be born as a male. If you've made the "lifestyle choice" to have a child, then you're probably 98% likely to bear the monetary costs of doing so, either through the "lifestyle choice" of leaving the labour market for the period of time of that child's early life; before you can either drop them off in child care (where you then have to pay for someone else to look after said child from post-taxed wages), or some extended period of time on reduced or zero wages whilst that child goes through schooling.
It's even worse if the father of the child has decided to make a "lifestyle choice" and has left the woman with the child, to bear all of those expenses by herself.
If a woman has made the "lifestyle choice" of having a child and then spending a few years out of the labour market, then that period of time will be a noncontributory period with respect to superannuation. Thus, that "lifestyle choice" which is usually made earlier in a woman's life, will have quite marked effects in her retirement due to the compounding effects of interest and the like.

Speaking on behalf of all white males, aged between 25-65, we've made the "lifestyle choices"  of choosing not to be born as a female,  not to bear the interruptions to out careers as the result of having children and because we're more likely to own businesses or have the power to make decisions on behalf of businesses, we're also more likely to be price makers in labour markets and to be more amoral and apathetic, and less altruistic when exercising that power.
The only rational "lifestyle choice" when participating in labour markets is to choose to be a white male; so that way all of the other "lifestyle choices" never have to be made. Males will never suffer any of the direct effects of having children; neither will they suffer any resultant effects in their retirement either.

"In a free and prosperous country, the government should not be fixing any price in the economy - and that includes the price at which we choose to sell our labour," says Dr Novak.
"Minimum wages presume that workers are incapable of judging whether the compensation offered is sufficient for their work.
Excluding low productivity workers from the employment market, minimum wages prevents those workers from getting the foothold necessary to gain experience and skills.
In other words, the minimum wage is a key driver of Australia's poverty trap."
- Dr Mikayla Novak, Senior Research Fellow, IPA, 22 Jan 2015²

While we're at it, the reason why the minimum wage exists is precisely because there is an uneven spread of market power with respect to labour markets. Without there being minimum wage laws in existence, businesses would choose to pay employees as close to zero as they possibly could in some circumstances. I absolutely concur that "Minimum wages presume that workers are incapable of judging whether the compensation offered is sufficient for their work" because in some cases, that is demonstrably true and its cruel to exploit that.
In the past that has included issues like slavery, or paying women less because they were women; currently it exists with the rise of unpaid internships.

Even the words 'minimum wage' should be taken as a signal from businesses that "we'd like to pay you less and lock you in by contract but we can't because that's the 'minimum wage' we can legally pay".

The current argument about wanting to reduce penalty rates in the name of reducing youth unemployment is almost completely a lie. In almost every case, it is about paying existing employees less, rather than wanting to hire more employees or extend business trading hours. Choosing to extend trading hours is like any other business decision, dependent on whether or not a profit can be made.
The reduction of penalty rates and the abolition of the minimum wage, are almost solely about reducing input costs for employers and nothing else.
Reducing penalty rates and abolishing the minimum wage has a very large effect on labour markets. It has the effect of pushing the supply curve for labour which leads to a new lower equilibrium position for that labour. Pushing this sort of legislation through the parliament is a very large and ostentatious display of market power and is very much in favour of price makers.
What I found particularly dishonest about the reply that I got from Dr Novak when I asked her about how she reconciled the two issues of so called "lifestyle choices" of women and the abolition of the minimum wage, is that she said that there was none.

hi, no inconsistency. One deals with minimum wages, the other with above-minimum wages. Ta for tweeting!
- @NovakMikayla, 21 Mar 2015³

Anyone who looks at the labour market with only a customary glance would notice that it is women who are more likely to bear the brunt of such legislation. Women are more likely to work in the retail sector and in lower paid industries such as childcare and so are more likely to be directly affected by the abolition of the minimum wage. Maybe Dr Novak thinks that it's even virtuous and efficient that the market should find a new lower equilibrium position for women's wages. Obviously I can't comment because I'm a white male aged 25-65 and so people like me are less likely to be directly affected by the issue (though people like me are more likely to be exerting market power, making decisions which affect other people and more importantly, benefiting from the issue).
If the minimum wage is abolished and penalty rates reduced or cut, it then means that the same people then have to work longer hours to achieve the same level of wages that they would have done previously. If there is a single mother who needs to find the money to cover expenses like rent, electric, water, groceries etc. then I suppose that you could call the operation of the market which would result in her working longer hours is both virtuous and efficient and you may even choose to blame her for her "lifestyle choices" but I think that it's cruel and that policy makers who don't consider this are also cruel.

It's also worth remembering that the IPA was very much represented in that first Canberra conference of the Liberal Party and that the IPA and the Liberal Party have been closely aligned ever since. Often what gets discussed in IPA papers becomes Liberal Party; it's often a case of the tail wagging the dog.

I think that it's important to be asking questions with regard to gender pay inequality and issues surrounding the minimum wage and the like but to conclude that the market is entirely virtuous and produces the most net good for the most people is in my opinion, not particularly well guided at all; at worst, it's downright callous.



Anonymous said...

your not a woman so ur opinion dosent matter

Anonymous said...

Look at the endemic low wages in America (e.g. Walmart, etc): the economic darling of the Liberal Party / Institute of (Right Wing) Public Affairs. Hardly an example of the powerless using their 'power' to decide what wages they'll accept. eh. BTW what makes Mikayla a spokeswoman for women?