All Commentary
Friday, January 1, 1971

The Feminine Mistake: The Economics of Women’s Liberation


I first read about the Women’s Liberation Front in the spring of 1969 in a copy of New York, a new magazine devoted to the cru­cial problem of how to survive in New York City. That description of WLF opened with an account of a young heiress demonstrating karate as one of the basic skills needed for her survival. At the time I was inclined to dismiss the WLF as just another of the freak­ish movements that seem to flour­ish in alienated urban cultures, or in the educated segments there­of. But in recent months I have come to the conclusion that the WLF is important, and that it is dangerous. Not because of the “crazies” on the fringe—who grab the headlines—but because WLF has latched onto an appeal­ing (and fallacious) slogan: “Equal pay for equal work.”

By focusing attention on the very real fact of differential pay scales between men and women, WLF activists have gained a wider audience than might other­wise have been likely. Here, it would seem, is a legitimate com­plaint against the supposed in­equities of the capitalist system. Here is where “male chauvinism” makes itself felt: pure discrimi­nation that is in no way related to one’s personal capacities or per­formance. This argument cannot be dismissed with a shout of “You look like last year’s sneakers, sister!”

The reason the WLF has been able to gain a hearing on the “equal pay for equal work” pro­posal is because it is already right in line with the last thirty or forty years of government inter­ventionism. It presupposes that the government, merely by enforc­ing a wage law, can in some way influence the aggregate economy to move along “positive, humani­tarian” lines. This proposal, be­cause it is not radical in 1970, lends an aura of respectability to an otherwise ludicrous movement. “Some of their rhetoric is exag­gerated,” one intelligent woman remarked to me, “but you can’t argue with them on this point.” I can, and I will.

“Fair Employment”

The argument in favor of “equal pay for equal work” rests on a concept of labor that was overturned in the 1870′s. It as­sumes that there is such a thing as concrete human labor, a phys­ical entity that in some way can be measured. Value is in some way linked to labor, and pay should reflect value. This was the economic premise of virtually all economists until the advent of modern economics; Karl Marx was the last major economist to hold the labor theory of value. Modern economics rests on the concept that value is linked to usefulness; the value of labor depends on the value of labor’s output. The dis­tinction between the two concepts of value is crucial.

When Women’s Liberation ac­tivists argue that a basic im­morality exists in any economic system that does not reward all laborers equally for equal work, they imply that capitalism has in some way failed the test of common decency. What they do not realize is that competitive market capi­talism actually comes closer than any other operational economic system to meeting their demands. All factors of production are re­warded exactly according to their productivity in a model of pure competition; in practice, market capitalism approaches that model in a remarkably close way. But the reward is not in terms of the “equal pay for equal work” slo­gan; the reward is based on the concept of marginal cost, or “cost of the most important use fore­gone.” The cost of any factor of production is based on the cost of the least expensive substitute for that factor; its value is depend­ent upon the economic value of its product. In the long run, the free market tends to work, through competition, toward a balancing (or equating) of economic value and economic cost. Any factor of production that is receiving too large a share of net revenues will be forced to accept a smaller share through competition. This is true whether the factor of pro­duction is a computer or a secre­tary.

The advocates of “fair employ­ment” keep pointing to the pro­duction side of the equation, vaguely identifying the product with “work.” But the return to any factor of production is based upon the cost of replacing that factor just as much as it is based on the value of the factor’s prod­uct. Competition is supposed to equalize the two—cost and value—if maximum economic efficiency is to be maintained. (By economic efficiency, the economist means the highest value of production from a given input of resources, or a given level of production from the least expensive input of resources.) Therefore, the return to the computer is not based on “work,” and neither is the return to the secretary. The return to each is based upon its contribution to pro­duction in comparison to the po­tential contribution of the near­est competing factor. That is truly fair employment. (Now, one can also speak of charity as a means of increasing the return to a par­ticular human factor of produc­tion—paying him or her more than he or she is economically worth—but one should not argue for this in terms of economics, a mistake made by virtually all of the “fair employment” advocates.)

A woman who is seriously con­cerned with getting fair pay for her contribution—mental, physi­cal, or simply resembling Raquel Welch—has to ask this question: What would it cost this company to replace me? If a woman knows that there are five other women ready and willing to take her sec­retarial job at $350 a month, then she would be wise not to demand very much more than $350 a month in wages. She can demand a bit more, given the costs of train­ing a new girl, the difficulties in­volved in all bureaucratic changes, and the tastes of her boss with re­gard to what constitutes someone who is sweet, cute, and so forth. But she must limit her demands.

Willing to Work for Less

The WLF complains that women are forced to accept menial wages. But in many, many cases, the reason she can accept such wages is precisely because she enjoys the advantages of being a woman: she has a man who will help bear the financial burdens of her own up­keep. She is on the job in order to supplement his earnings, so she is willing to work for wages that are essentially supplemental in magnitude. This, of course, means considerable hardship for the working woman who has no hus­band to support her. But her case is not fundamentally different from the man in his late thirties who has eight children and who is faced with competition from bright, young, single college grad­uates who are willing to take over his job at the same pay, or per­haps slightly less pay. The value of one’s contribution to a com­pany is not directly related to one’s marital status or the num­ber of children involved.

If the advocates of “fair em­ployment” are really concerned with morality, then they must ask an additional question: What are the burdens imposed on the per­son who is unemployed but who would be willing to take a job at lower pay? Fairness should relate to all those in the economy, not just those insiders who happen to have the jobs in question. The supporters of “fair employment” legislation are unwilling to face the other half of the labor equa­tion, the “unfair unemployment” generated as a direct consequence of the “fair employment” law.

Minorities and Costs

The explanation of the “menial wages” paid to secretaries is not too difficult to present, once the concept of the return to a factor of production is grasped. Compe­tition keeps wages down, just as it keeps prices down. The WLF women are not really that con­cerned with the wages of the secretary, however. The members of the WLF are the better edu­cated segment of the female pop­ulation; what they refuse to ac­cept is the fact that women execu­tives are paid lower wages. That, it is argued, is a consequence of male chauvinism. Why aren’t their M.A.’s worth as much as some man’s M.A. (or even B.A.)?

I am willing to concede that there is such a thing as a cor­porate bias against employing women. For one thing, men inside corporations have little desire to expand the pool of available labor to compete for their jobs. For another, most men probably re­sent the idea that women could replace them in their jobs. Like most prejudices against collec­tives, the thought which galls male employees is not the idea that a particularly gifted woman might replace a particular man (which is, really, the kind of decision that is made in a business firm), but the idea that “women” can replace “men.”

People are geared to think in terms of aggregates, even in those decisions that are essentially in­dividual (or, in economic terms, “marginal”). So those inside com­plain, “If you let one of them in, you’ll have to let them all in,” which is patently false, and to combat it, those on the outside yell, “Then if you won’t take one of us on his (or her) own merit, by George, you’ll have to take all of us!” So they put pressure on the government to pass a “fair employment” act that prohibits discrimination, and thereby con­firms the worst fears of the insiders. And then there is pressure to take incompetents into the firm, just to meet the external re­quirements of the legal system. Pass a law against economic big­otry, and you help to confirm the dire predictions of the bigots. Tokenism replaces competition.

Let us therefore assume that men are bigots when it comes to hiring women. Some of the big­otry, however, is not irrational. There are basic institutional rea­sons why women are not sought after as men are to serve in ex­ecutive positions. The obvious one is that women marry and have children. For a job requiring con­siderable training and experience, the threat always exists that the woman will quit for family rea­sons. Men also quit their jobs, but generally for economic rea­sons. A company can raise a man’s salary and at least have some chance of success in keeping him. Also, a woman’s husband may decide to move out of the area; it is his decision, and his wife must follow. There is no way a com­pany can fight his decision with much possibility of success.

Traditional Hiring Practices

Another basic reason why wom­en are not hired is simply because they have not been hired in the past. Bureaucracies do exist, and habitual patterns do get estab­lished, and there are fundamental costs of reorienting any bureau­cratic structure. A change in hir­ing practices certainly affects one important part of any company’s organizational pattern. You do not “shake up the system” any time without bearing certain in­stitutional disutilities—costs. The greater the break with traditional hiring policies involved, the great­er the disorientation, at least initially, of the company.

There is one final comment that seems appropriate. If a survey were to be made of any random secretarial pool in the corporate structure of America, it would be quite likely that a sizable majority of the women would prefer to be under male supervisers. Given the opportunity of serving under a woman holding a B.A. or a man holding a B.A., most women, I think it is safe to say, would choose the man (assuming similar personalities and competence of the competing candidates). If the men of a corporation had the choice, an even larger percentage would be likely to prefer mascu­line superiors. This is a fact of life, unlikely to change in the near future. A corporation must weigh the initial disadvantages of thwarting this preference among its employees. The woman prob­ably will have to offer some spe­cial advantage to the company that her masculine competitor cannot or will not.

Wage Competition

I appeared on a Los Angeles television show in November of 1969. It was one of those after­noon talk shows aimed at the “lunch bunch”—a distinctly fem­inine audience. Preceding me was an articulate, middle-aged lady from England, the founder of a female labor exchange organiza­tion which supplies womanpower to various corporations. By pre-1968 standards, she would have been considered a militant for women’s rights. As the director of this multimillion-dollar organ­ization (an even more remarkable feat by British economic stand­ards), she was asked what she thought of the fact that women get paid less than men for their labor. “Well,” she replied, “the best form of competition we wom­en have is our willingness to work at lower wages. If you were to eliminate that, you would remove our most effective employment weapon.” That woman understands the nature of competition.

The fact that the “equal pay for equal work” law is not yet in operation makes it possible for a woman to obtain that initial ac­cess to a previously masculine occupation. If she were to demand a man’s wages initially, she would stand far less chance of gaining her real objective, namely, the opportunity to prove her capacity in the occupation of her choice. The company hesitates to hire a woman, given the definite uncer­tainties in hiring women in gen­eral. (Is she a Women’s Lib type? What is she after?) But if she can offer the company a premium to offset the logical risks involved (not to mention the questionable hostility), she can make it worth the company’s risk. The most ob­vious premium is a willingness to take a lower wage. If she should fail on the job, the company has not lost so much.

By removing this most effective of weapons, the WLF would seri­ously jeopardize the possibilities for advancement by women into the higher echelons of American business. Only the most obviously competent women, the ones from the best schools with the highest grades and most impressive out­side activities, would have a shot at the better jobs. Actually, the WLF proposal borders on the su­icidal: certainly it would not be the WLF type who would be hired unless she could show some over­whelming economic reason why she should be selected over a less radical miss from a prestigious finishing school (plus an M.B.A. from Harvard School of Busi­ness). The upper echelon posts would be converted into semi-monopolies of those women who already hold them. If the WLF’s goal is really to open the doors of American business to women—large numbers of women—the “equal pay for equal work” pro­posal is ridiculous. It is self-defeating. Of course, for those women already in the system, the law would be an almost flawless grant of monopoly returns.

Minimum Wage Law for Women

Inescapably, from the point of view of economic analysis, the “equal pay for equal work” pro­posal is the demand for a mini­mum wage law for women. The minimum wage would be equal to the minimum pay scale for a man of comparable talents and respon­sibility. Like all minimum wage laws, it is primarily a legally op­erating barrier against all those worth less than the minimum wage. As shown in the earlier part of this paper, the woman initially is worth less, not because of her lack of work, but because of the higher risks and economic-institutional disutilities associ­ated (in the majority of American firms) with hiring women.

In general, minimum wage laws force the less productive, higher risk, less desirable (for whatever reasons) persons into lower pay­ing jobs not covered by the min­imum wage laws. If the job mar­ket as a whole is covered, then the laws tend to force them out of work entirely. A person who generates only $1.25 worth of returns to his company will not be hired if the minimum wage is $1.75. Those least able to afford unem­ployment—the least skilled, least educated—are the ones hurt most by the laws. In this country, as study after study indicates, this means the Negro teen-age male, but it also means the less skilled women. Those just entering the market, with little experience and training, are the “first fired, last hired.”

Our WLF propagandists insist that housework is the intolerable curse of the American woman. It is housework’s boredom and lack of creativity that oppresses wom­en, degrades them into beasts of burden. That women would have to seek employment as household workers is, for the WLF, the ulti­mate example of male chauvinism. So what do we find? The minimum wage laws have been the most effective means of forcing more women into employment as house­hold domestics!

Household employment is not covered by minimum wage laws. As a result, those women who have been excluded from jobs in the covered industries (since they are not allowed to compete by bidding down wages) are now forced to seek less desirable em­ployment. This means they must go to the uncovered industries. It also means that more of them than would enter this market in the absence of the laws now try to get in, thus forcing wages even lower. Professor Yale Brozen of the University of Chicago made a study of precisely this effect of the minimum wage laws in the October, 1962 issue of The Journal of Law and Economics. He sur­veyed the employment figures, be­fore and after a rise in the mini­mum wage law, in three different periods. His conclusion: “In each instance when the minimum wage rate rose, the number of persons employed as household workers rose.” He then made this warning:

However, the coverage of the Fair Labor Standards Act has been broad­ened, and further broadening is pro­posed. Much further broadening will close the safety valve [i.e., the non-covered industries into which the un­employed flee]. We will, then, find the amount of structural unemployment (i.e., unemployment concentrated in certain age groups, in one sex, or race, in groups of less than a given level of education, and in certain regions) in­creasing as minimum wage rates in­crease.

This prospect, of course, applies only to the less desirable employ­ees or potential employees. “For families with large numbers of children [which can now employ cheaper servants] and women em­ployed in better paying occupa­tions, further increases in mini­mum wage rates and their cover­age may be very desirable, how­ever unwelcome this may be to the less educated, less skilled fe­male worker foreclosed from a better paying job by the rise in the minimum rate and coverage.”

Across the Board Effects

Brozen is considering only the more familiar minimum wage law, the kind which sets a fixed mini­mum wage per hour for all mem­bers of the population in the cov­ered industries. The WLF scheme is not quite the same. What the “equal work for equal pay” scheme would produce is a minimum wage law for all women throughout all covered industries, from the sec­retaries to the female vice-presi­dents. It would not be limited to merely those employees in the $1.50 to $2.50 per hour range. In­stead of seeing only the bottom segment of female employees forced to take less desirable posi­tions, i.e., those which the men would not be bidding for anyway, the WLF proposal would see to it that all entering female employees would be downgraded (except for the few token women hired for the purpose of fending off a Federal investigation). There would be a downgrading all the way along the employment ladder.

Companies would not outwardly break the law, of course, but there are many ways to avoid regulations that are undesired by personnel departments. For ex­ample, two applications are received: a man holds a B.A. and a woman holds a B.A., and both seek the same post. The woman had better be from a prestigious academic institution or have had some kind of previous business experience, or else be physically attractive, and the man should have no exceptional qualifications to distinguish himself. The wom­an might very well be qualified for an even higher post, one which her male counterpart would not even be considered for, so she is, in effect, downgrading her oppor­tunities to be employed in the higher echelon job. For her to meet the true demand for labor on a competitive market, she can take a prestigious job at lower wages than her male counterpart, or take a less prestigious job at equal wages to her male counter­part. She cannot take a higher job, given equal qualifications of the two applicants and equal pay scales, for the reasons outlined above: women are less desirable employees for most companies, and they must distinguish them­selves in order to be hired. A law will not change the basic economic parameters of the labor market; it can only change the ways in which the discrimination is ac­complished.

Downgrading Hurts Most at the Lowest Levels

The downgrading effect will, as always, be most harmful to those women who are not members of the population segments from which the WLF recruits its mem­bership. As women at one level of employment are forced into the jobs below—the jobs in which less training and lower educational qualifications are required—the women who would originally have applied at the lower level will be forced to accept an even lower classification. Finally, the glut will appear in the “uncovered” portions of any company’s jobs, i.e., those jobs unaffected by the “equal pay for equal work” law simply because no man would ap­ply for them with or without the law. The law will produce struc­tural unemployment in these jobs, or else the older pattern 4 wage competition will appear once again: women competing only against other women on a market in which not only the usual secre­tarial candidates are scrambling for jobs, but also the women forced out of the next higher level of employment by the “equal pay for equal work” law.

Women without husbands or wealthy fathers to supplement their incomes will be the losers. Women who have not attended the better colleges will suffer far more than the very bright, highly quali­fied, highly ambitious types who can gain access to the prestige jobs from the start. Men, of course, will continue to be hired. Women will then be in competi­tion primarily with women. By changing the competition param­eters from wage competition into educational or experience competi­tion, the women without the “pa­per qualifications”—college de­grees, years of successful employ­ment, an attractive photograph—will be the losers. Their most effec­tive tool of economic survival, namely, their willingness to com­pete with the male employees by accepting lower wages, will have been removed. The beneficiaries will be those women with the col­lege degrees and those already in their chosen jobs.

Conclusion

The WLF, by the very nature of its economic proposals, has rele­gated itself into a role more gen­erally associated with the opera­tion of a medieval guild. It has become the advocate of a monopo­listic, prestige competitive, high security employment system, one geared to all those women with im­pressive educational backgrounds and/or impressive physical pro­portions. The “equal pay for equal work” scheme is essentially elitist. As Max Weber pointed out half a century ago, the mass market de­mand for goods and services came to the West only when competition shifted to price competition. He called it “the democratization of demand,” contrasting it with the medieval emphasis on the produc­tion of luxury goods by and for elites within the economy. As he wrote, the shift from production for elites to production for a mass market “is characterized by price competition, while the luxury in­dustries working for the court fol­low the handicraft principle of competition in quality.”

What Weber wrote about the ex­pansion of the market for goods is equally true for the expansion of the market for labor. If you want to create a market that per­mits free entry, mass employment, and increased benefits for those not in elite categories, you must permit wage competition. Other­wise the employment game will be played in terms of paper quality: employment resumes, college tran­scripts and photographs.

Naturally, the WLF members tend to be recruited from just these elitist segments of the nation’s population. They are the girls with the college degrees and the affluent fathers who will be able to support them until they can find “the right job.” The WLF girl who is willing to put on a little makeup and hide her militancy to her employer will have access to the jobs denied to her less advan­taged sisters. She can drop out of the WLF and into a prestige job at her discretion. Therefore, what we find in the case of the WLF is a replay of a very ancient tune: a group calling for the imposition of a government law for the “good of the masses” ultimately encour­ages a law which would benefit the elitist stratum from which it re­cruits its members. Here is an­other example of the privileged minority which does quite well by doing good.

The Competitive Firm Will Pay Women Fairly

For the woman who is really competent in what has generally been regarded as a man’s world, the “equal pay for equal work” scheme cannot help her, and it may hinder her initial access to the job in which she expects to demon­strate her abilities. Once she gets the job she wants, at whatever salary, she can prove her worth as a valuable factor of production, assuming she is talented. She will need no Federal law to get her legitimate reward from her em­ployer, assuming the employer is serious about staying competitive in the world’s markets.

There are, of course, inefficient firms. These will not strive to stay competitive, i.e., by rewarding every factor of production accord­ing to the value of its output. This is the kind of overstuffed, flabby corporation that Robert Townsend attacks in his delightfully icono­clastic book, Up the Organization. Townsend’s recommendation to the talented but underpaid woman is identical to his recommendation for the talented, underpaid man: quit. That kind of firm is not in­terested in competition and there­fore uninterested in creativity and production. It is best to get out. Townsend’s article in the Septem­ber, 1970 issue of McCall’s warns women that a company which con­sistently discriminates against women at all levels is probably filled with hacks, especially at the top; a good firm will pay her what she is worth. She should shop around until she finds one, just as Mary Wells, the enormously suc­cessful advertising executive, was forced to do. If a firm is competi­tive, Townsend writes, it will pay women fairly.

By implication, we ought to con­clude that the hostility to women who have proven their capability rests on a commitment to security above competition. Another mini­mum wage law will not solve this problem. What will solve it, as I argued in the January, 1970 issue of this journal, is a return to the decentralized, profit-oriented, free market business firm that is not shielded from competition by a host of Federal regulations and Federal subsidies, both direct and indirect. What the competent woman needs, especially the woman who is not loaded down with paper qualifications, is that initial shot at the job that will serve as her testing ground, re­gardless of whether she gets a paycheck as large as a man’s. What she does not need, and what those of us who benefit from her greater productivity do not need, is the establishment of the WLF’s neomedieval principle, “equal pay for equal work.”

 

***

Everyone Wants More

It may be taken for granted that all men want greater rewards, either material or psychic, or both, than they are receiving. In some the desire for increased reward is much keener than in others; those in whom it is keen are on the lookout for more lucrative employment. Some complain that their rewards are altogether “too small” and insist that they should have more. If they are able to persuade the community of this, they may be given an additional material reward or they may be offered the chance to work and earn an additional amount.

Those whose rewards are considered by the community to be “too small” and who aver that they want to earn more are classed as “unemployed” and are looked upon as a social problem. The “problem” is to increase their rewards. It is assumed (wholly without proof) that they cannot do this for themselves and hence that society must do it for them.

However, the “unemployed” are not differently situated from others. They are receiving some rewards and they want more; the same can be said of us all. If the “unemployed” are helpless, so is everyone.

OSCAR COOLEY, Paying Men Not to Work


  • Dr. North is president of The Institute for Christian Economics in Tyler, Texas. He was FEE’s director of seminars in the early 1970s and has served as a member of the board of trustees.