Monday, February 2, 2009

Paved with Good Intentions

It has been a very common belief among liberals that if only we could get the right people into office, everything would get better. Now that Obama, who by consensus is "the right person," is in the White House, we'll get to find out if that belief is true. If the new equal pay law is any indicator, the answer is "No."

On the surface, the law seems like a good idea. Why should men get paid more than women for doing the same job? It is a good intention, but there are a couple of problems with it. The first law of economics is that people respond to incentives. So let's look at some incentives.

At a typical company, some of the workers are very dedicated. They care about their job, learn as much as they can about the business, and go the extra mile to make sure the job gets done right. Other workers, on the other hand, just want to get paid and do just enough and just well enough not to get fired. In a perfect situation, the dedicated worker gets paid more than the slacker, and gender has nothing to do with it. In real life, sometimes there are discrepancies, and if this new law gets strictly enforced, some companies who happen to have skewed pay distributions for whatever reason will face fines and/or lawsuits. Some other companies will see this happen and decide that it's easier and safer to just pay everyone the same for the same job, with maybe some allowance for length of time worked and education. So the dedicated worker will get the same pay as the slacker and both will know it. The only way for the dedicated worker to be rewarded is to seek a job at another company with a higher pay scale. So now we have different companies with different pay scales, and there's bound to be some uneven distributions here too. The next step, if government really wants to pursue the matter, is to set pay rates by profession. Now some bureaucrat in Washington is deciding what you get paid, and ability and dedication have nothing to do with it. Is that what you want? And what happens to productivity among the dedicated workers who can't move up to the next pay scale at another company?

Next problem: laws are enacted congressmen with good intentions (let's be generous), but implemented and enforced by a different set of people. The people implementing and enforcing the laws don't necessarily have the same intentions. And, as you have seen from the example above, intentions can't always be implemented because people have the annoying habit of pursuing their own best interest to the extent allowed. It's not a "slippery slope," it's just unintended consequences.

So what's the answer? Well, if women are really paid less than men for the same work, they should be in greater demand from a profit and loss standpoint, and the discrepancy will be corrected by employers who naturally want to get the best employees for the least amount of money. The answer is to ask the question: what is it that stops this from happening?

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