 Welcome to the FeeCast, your weekly dose of economic thinking from the Foundation for Economic Education. My name is Richard Lawrence. Today, on our final episode of the year, 2018, it's been a great year. We have our panel, Anna Jane Perrell, Dan Sanchez, and Mary Ann March. Hello. Welcome all. Hello, hello. How does it feel to have come to this point in 2018, 30-some episodes into the FeeCast? Well, I'm a late joiner, so I would just say honored to be here. You guys have made a wonderful, you've created an environment where I can ask as many questions as I want, and I love hearing all of your voices, which are, you know, each have their own pitch, each have their own opinion. Yes, yes, and it's important that you mention pitch there, because of course, not only can people watch us, but they can also listen to us on Spotify. No, not saying. We're not going to sing, but we're on Spotify, we're on Apple, and we're also on Google. And so if you don't want to see Beardwatch 2018 progress into 2019, you can just listen to the pitches and the sounds and the timbre and all the other vocal qualities that we deliver here every week on the FeeCast. Well, so this week, I'm going to open up our conversation with a question. Are you more or less likely to believe a study if it comes from an institution named Harvard University? Just out of the blue, knowing nothing else about the study, if it's attached to Harvard, is that something that makes it more believable or less? It depends on the department. I was going to say the same thing. Oh, wow. Really? Oh, I'm going to be like, absolutely. Those are smarties. Okay. So with departments that you lend credibility toward at Harvard? Right. So anything with the physical sciences, anything with the word critical studies in it, probably not so much. Very critical and critical studies? Well, you know, anything where it's just really dense jargon and obscurity and nothing's provable and it's just... And nothing is tested after it's published. Right. Right. Let's talk about being uncritical. What about you, Marianne? Harvard, yay or nay? My ears would perk up a little bit, but then I think like Dan, it would depend on the topic. So the jury's out for you. You actually want to read the study before actually making a judgment about it, Ann and Jane? On my best day. Yes. If we're Goldilocks, I'm definitely on the far end of I'll believe anything, whatever you have, it comes from Harvard that must be right. Well, so I wanted to ask that because we have a very popular piece on feedoutorg this week and it opens with Harvard study colon, gender wage gap explained entirely by work choices of men and women. And this is by John Fallon and it's getting a ton of traction on our site and it's a big, big claim. And it seems like people are interested, not only in the subject matter, but also the source. And what it basically finds is in a working paper that some scientists at Harvard issued recently that looks at the Massachusetts Bay Transportation Authority, which is a heavily unionized rules-based shop, it finds that any kind of discrepancy between the wages of men and women is explained entirely as the title mentions by choice. Well, and it's a very controlled experiment because since it's such a union shop, everything is very regimented in terms of how you can climb the hierarchy within the system. So it's based on seniority. It's just pure seniority and the seniority determines what kind of preference you get to exercise over the routes you take, whether or not you do overtime. There are choices within working at the institution, but it's just based on seniority. And so there's very little room for discrimination because there's very little discretion on the part of it. So basically you're saying the pay is all based on seniority in this study? No, not the pay necessarily. I mean the pay to some extent, but the choices of what kind of work you do. So one of the quotes that it says is that male and female workers of the same seniority have the same choices for scheduling routes, vacation, and overtime. And so what happens is that people make different choices about those things and then it results in a difference in pay that female workers earn 89 cents on the dollar of male workers. And so that says two things. Of course, it speaks directly to the commonly used number of the gender wage gap being 80 cents per every dollar. So in that case that women are making only 80% of what men are making. But it also speaks to the fact that indeed there is a gap. This gap exists even when it is a tightly controlled environment such as a union shop where seniority isn't based on much preference that a boss might exert at all. And the point here is that there might actually be choices that at least these bus drivers are making, these men and these women, that say, you know, look, if it's up to me, I as a bus driver am either going to take the harder routes and then not have to work as much time or I'm going to work more time and do the easier routes. For example, male train and bus drivers worked about 83% more overtime than their female colleagues and were twice as likely to accept an overtime shift. Right. And so they accepted overtime the men did as opposed to the women who just wanted to get work done with and, you know, they ended up making less for it. Or maybe they had other things to do at home. Right. So one of the things that they said is that parenthood turns out to be an important factor for the men too, but in different directions. So fathers are more likely than childless men to want the extra crash from overtime. So family made them work more overtime, whereas mothers were more likely to want time off than childless women. It's interesting. So this all kind of flies in the face a little bit of what we've all been hearing for a long time, unless I assume you're under a rock, which is that there is a wage gap at 78 cents, 80 cents, difference to a dollar, women making less than men. So basically the study is saying, not so much. Yeah. Well, and I think what the study is reinforcing is, and many other studies have, have posited this as well, that again, it comes down to choice. The gap exists. But also the big thing that we need to take into account is that when you're looking at aggregates, you're not getting the full picture. You have to look at individuals at whatever stage of life that they're in. Well, I remember, and this is kind of where I remember one of my first aha moments in my relationship to Austrian economics is I was in an econ class and we were talking about the wage gap and the teacher goes, don't tell the ladies over in the women's studies department that the wage gap is actually not what we think it is. Because if you talk about, talk about individual choices and how that affects, I mean, of course, they break it down in the article that we posted on fee, on fee.org. You can see kind of how that number, the traditionally talked about number has been arrived at and it's really rudimentary and it really isn't speaking to individual choice in the labor market. Right. Because basically they just take the just all full-time workers and the total pay for men and divide it by the number of full-time working men. Right. And then they do the same thing for women. And so it's not disaggregated at all. Yes. Like it's not, it's comparing apples. And it doesn't, yeah, it doesn't take into account. I mean individual choice. And that was my first, again, my first aha moment that I realized that we can, we can try and look at numbers and we can try and look at studies and the results of, or we can talk about aggregates. But one of the things that is fundamentally true is that humans are, it's a difficult thing. The human component will always be a variable that's not easy to measure. And there are a lot of different factors. You can't just say, pull a woman out of the population, she makes this amount of money, pull a man out of the population, he makes this amount of money. I actually had the opportunity when I was a student at Georgia State to take a class about policy data analysis. And we got up to the elbow in that data, running regressions and all kinds of linear things that I could barely repeat now. But tell me the R square later. Yes. And through getting into the data, I found that when you controlled for grades, for years of education, for federal experience, for the title of either a supervisor or a manager, once you control for all these different factors, the wage gap pretty much disappears. And this is, there's a possibility for everyday people to, to look at the numbers and see this kind of thing, but it's, it's just so deeply ingrained in the culture that there is a gap that even bringing it up is a little, like, can we even discuss this? Yeah, I mean, I think that you may, you and I may feel this, like kind of like we're betraying our gender by suggesting that, okay, this isn't the full picture, and we need to talk about choice. So, you know, what kind of career path are women versus men more likely to choose? And what, what is, what are they, what are they motivated by? And is that something that is, you know, we're talking about socialized identity and behavior and also things that are maybe evolutionary, maybe, I mean, psychology, socialization, all of this stuff wraps into our individual choices. And it's so hard to measure and just say that it's a systemic problem, right? Right. Well, and, and it does go back to choice and, and also maybe some other factors which we'll talk about in a bit. I think one of the most interesting things in that piece from my standpoint, the one that I mentioned at the top is that it details a couple other studies. There's one from the Institute for Women's Policy Studies, I believe it's called. Yes, the Institute for Women's Policy Research. And it basically does bad science. It basically combines in a similar fashion to how Dan mentioned, all the women working in the country and compares them against all the men working in the country. But it doesn't even look just at full-time jobs. It looks at people working part-time and even occasionally. And it finds magically, as you would expect, that the gap is even larger. And so I think there's a lot of difficulty with measuring this kind of thing. And it, it brings up all kinds of questions about, you know, what's the validity of looking at the aggregate for the entire population and trying to say that it then pertains to an individual. You can't find individuals represented in aggregate studies. It just does not exist. There's actually a fallacy. It's called the ecological fallacy. I discovered as I was preparing for today's show, it's the conclusion that what is true for the group is true for the individual. And the ecological fallacy doesn't really seem to play out all that often. Yeah. One interesting thing that I did find was that when we control for all these different things, the, the gap becomes about 98 cents, $2, just a couple of cents different. But the gap widens back again when you're talking about executives. So I think there is still room to talk about, to talk about that, about an under representation of women in the very top pools of talent. And it is, it is my personal belief that perhaps we as women are still making, making choices as we've discussed. There's, there's a lot of temptation to, to leave the boardroom and go home. And, but I think that when we are comparing executive apples with other executive apples, there still is a little bit of a gap. So I don't know if we're out of the woods just yet. People are people, individuals are individuals. They're going to make different choices, you know, between folks. So let's, let's talk about the reasons for this gap. There are many ideas behind how this could come about. You know, people say the good old boys club still rules in the boardroom and various other places. That's obviously cultural, historical. What other reasons are there for this gap that we're really talking about quite often these days? Well, yeah, I want to highlight that. Yeah, like you're saying, this is about how we as individuals make choices. I think just so much, and I have a background. So I mean, I study economics, but I also study gender and sexuality studies. So my, my perception is definitely a sociological one in the sense that people are socialized around these values that we see. But I also think, so that's my perception is that we need to stop thinking about it as a systemic problem that is essentially an external force acting on us and talk about how we all interact with each other. That's socialization, how we exchange values and how we promote our values. That's an individual choice. That's individual interaction. And so what I think we're seeing is the result of choices made based on social socialized values, which is women. And this is a deep, a deep generalization, but a good to me a good example of what we're talking about when we talk about how it's not measuring the choice of a woman who may have been socialized her entire life to believe that caregiving is ideal. So she would go into a career as a nurse rather than as a doctor or, you know, something like that where, or every woman in her family has been a nurse. So even if she has the medical, even if she has the knowledge and the, you know, the intelligence to understand medical practices, she may choose to go into nursing because, you know, because her family has done that. Or something like that, which again, generalization certainly, but I just wanted to kind of talk it through when you're talking about an individual, the values they've been socialized with and the choices they make based on that. Well, talking about society, you're talking about generalizations. Unless you know these people, you have no other basis to go on. And then, and then with these generalized tendencies that if, if to the extent that it's not socialized, it's going to have more of an impact out on the edges than for the bulk of the population. So, so for example, executives, like, like that is a very slim sliver of, of the population. Making a whole lot of money. Right, right. And so are, like, murders. It's also a very slim portion of the population. But then you find males way overrepresented among murderers too. Because so there's a certain, there might be a certain, maybe it's socialized, maybe it's, maybe it's natural. There might be a certain tendency towards aggressiveness that for the bulk of the population, it's not going to make that much of a difference between the representation of men and women among different things. But among murderers, like it makes a huge difference that that like that small difference is going to really make a big difference in terms of how men are represented among murderers. And so, so maybe it's the same kind of thing when you're talking about like super high competitive, high aggressive, you know, the executive realm, that like a small difference in like psychological tendencies might have like a big impact. A huge impact, yeah, to influence a statistic to a large degree, right, for such a small population. Oh, and I think you're, you get to you to do the marginal analysis. I mean, that's where a lot of the insight can be gleaned here. Well, I think that also yes. And it's, you know, of course, just my background pushes me to say, Oh, it's a socialization problem. But I think that Dan's pointed out some really good, some good points as well, which is when we talk about, you know, evolutionary psychology, that's, that's a challenging topic when you talk about what is a nature versus nurture, a classic, a classic argument. And I think that it's just, it's a, it's a healthy mix of both. And I think that we see, yeah, kind of over emphasized results of that on the margins. That's a really good point. One thing that we haven't touched on a lot yet is the amount of unpaid labor that women do in the home. Women are more likely than men to take care of things like cleaning and food preparation and just general child care and things I've read on an average day, maybe three hours more a day, women spend on these kinds of activities versus men. So I think that's kind of where a lot of, a lot of the frustration might lie and where people would be more likely to accept a number like 78 cents. It's like, well, yeah, as a woman, I work hard at my job and then maybe I go home and then I spend time on activities that are beneficial to the home, but to the community and society at large that are unfunded and there's no, and how would you even go about funding that? I mean, we're not going to, how do you pay somebody to, you know, clean up after themselves? It's, it's kind of a weird idea, but, but there is this difference in society of unfunded labor. And if people did have to start funding it, what would that mean? And I just, any thoughts on that? Well, I think, I mean, I don't mean to be anecdotal again, but just thinking about, and I hate to stress it again, it's a socialized value too. I think that women would be more likely because they are rewarded, not rewarded per se, but perhaps derive value or feel paid by the experience of taking care of the family from a socialized perspective. So they are, that they've been socialized to believe that maybe their role is part as a caretaker, not that, not that men are not socialized that way, but I would say more so. And again, huge generalization, maybe that's what women experience at least in our culture. I know my dad, you know, he definitely felt the most good about taking care of his family when he was working long hours, which is so different than thinking about my mom who was willing to take a lower paying job so she could have more flexibility to come home, which is again, two expressions of love of care, but look very different, especially when you're talking about pay. I think it would be foolish to fall into the trap of trying to explain every part of human behavior, especially in the home with loved ones, in economic terms, right? I think there is something to the notion, however, that there's some value being created, even if it's unpaid labor around the house, by that type of work. And I tend to think too, I mean, when you just have to continue going back to choice, you have to continue going back to what do people who, you know, either have a long term homemaker job, what's going through their minds? I mean, is this something that makes sense for them? I would think, unless it's an abusive situation, of course, there are those that in most of those cases that this is obviously something that they choose to do, that they feel compensated for, maybe not monetarily. And maybe again, that's not the right way to look at it in economic terms. But, you know, the ties that bind family together are obviously valuable in and of themselves. Like a love currency. Sure. Right. I mean, that is, it's a value you're being given. Well, yeah. And the way that compensation actually, what it's ultimately for is for higher living standards. And the thing, so... I think that's a great point, Dan. It's not compensation for the sake of compensation. That's what, you know, the pay gap and the income gap and wage disparities and income inequality, it all goes back to what you're saying right here. It's not pay for pay's sake. Right. The reason why we want to be paid money for work is so that we can increase our quality of life. So that we can buy goods that make life easier and more comfortable and enjoyable and fulfilling. And the thing about household labor is that it still creates that, but more directly. So just the labor creates like a higher quality of living directly. And so it ultimately translates to the same thing. Oh, that's what you're saying. But not through the money nexus. Your quality of life, yeah, is increased or preserved based on that labor. And it's not just the money is the middleman that speaks to that. But I see, but and then this is more direct. Right. You can't eat cash. You can't cash. Cash does not in and of itself make a beautiful place for you to live. So I've got a question for you. So of course we're talking a little bit now over the past couple of minutes about homemakers, right, people who choose to do work in the home and not get paid for at least not directly, right. But should women who choose not to work in the home be, I suppose, punished by sort of the expectation that their their peers who work in the home have set, meaning should women have to put up with lower wages of whatever amount, even if they don't choose to work in the home at all? Does that question make sense? So you're saying that regardless of my personal choice to have a family or to contribute any to even clean my house, whatever. If I don't need that extra time or I don't need that flexible schedule, shouldn't I be paid more because I don't need you know, I'm taking a little job to speak to that. I don't know. I hate saying should I don't like shoulds. That's a really I don't like phrasing questions that way. I don't know. That's a hard question. Working woman's out there and she's chosen to dedicate her life to a paid career outside of the home, and yet she's still bound by this social expectation that women don't work out of the home as much. If I'm gonna should, I would say individuals should be compensated based on market prices, regardless of whether or not their social expectations. I do feel that we've shifted a little bit away from that being the norm, the kind of the premise that you're basing your question around. I think that these days it's maybe the opposite. I think that women, there's a greater expectation that women will do everything. That we will be rock star moms at every soccer game, but also kicking butt in the boardroom and also looking good while we do it. There's there are these different kinds of pressures. So I don't even know. I don't think that there's a judgment about leaving the home if that's what you're saying. I think it's maybe a little bit more the opposite that women are probably more likely to be judged for just working in the home only. Does that answer your question, Richard? It's a tough thing. And so, you know, of course, it's obviously something we're talking about. People are talking about it. I think Ivanka Trump has some thoughts on how to address these issues, whether they exist to what degree or not. So what are the solutions? I mean, what would what would the fee gang, the fee cast gang here say? If, you know, we have this problem, let's just accept that for argument's sake. How do we address it? Yeah. Well, I want to jump in. I, you know, again, as I'm saying, if I perceive socialization as the key problem or at least the only thing we can control and identify as the social component where we're socializing certain values in this culture. If you want to fix that and you want to take a free market approach and you don't want, you don't want the government to have to be responsible for fixing this problem. My solution would be, okay, I am, I'm going to lean in. I really care about other women. Oh, you're leaning in. Hearing that message. I care about that. I am going to start Anna Jane Perrell's Foundation for the Progress of Women. And I am going to get all of my donors who are, you know, providing their funds willingly to buy, lean in for, you know, for girls, for high school girls, or, you know, start a really cool marketing campaign that speaks to the social values around women as executives. Or something like that, right? You, I think that you create resources and access to information that either changes the conversation or encourages social behavior in the direction you want it, rather than creating prohibitions or creating regulation around it. You empower people to make their own decisions by providing resources that you feel promote the values you want society to value. So you would develop individual women instead of trying some massive society-wide campaign or government. Well, see, I feel like you can still do massive campaign, but you can do that with the free market, right? I can create my organization where my donors are, like I said, giving us money freely, and then we're going to create a national campaign. You can do that, but I don't think that that's the government's responsibility. And ultimately, I mean, like we all would agree, I don't think the government would do it most efficiently. All right. So equal pay for equal work laws, yay or nay? I don't like big brother looking at my stuff. I mean, I know the IRS pretty much already knows about my financial situation, but I don't like the idea of being forced to give up that information in a different setting outside of the IRS. I mean, I don't like to give it up to the IRS. Let's begin. Let's be honest. But so I think when you say there ought to be a law, you're saying there ought to be a lot of bureaucrats running around with a lot of power to tell me what to do. And I don't like that. So I think I kind of take a page out of Anna Jane's book. And actually, if you'll allow me, I would like to just address the audience for a moment. Go get your money. Go ask for a raise. Women, if you're listening, we have to take some personal responsibility for being tenacious and for taking control of our financial lives. And I think that since we've spent a lot of time talking about the individual versus the aggregate, let's talk about some individuals. First line supervisors of retail sales workers, these are the most likely people to earn less. Women in these positions are more likely to earn less than their male counterparts versus other industries. So first line supervisors of retail workers, go get your money. We've got to we've got to play it where it lies. And if there are specific industries that are more guilty of paying people different wages than others, let's start there and start with talking to those people. Yeah, and it's a conversation also. So if we're talking about, yeah, we every time you say there ought to be a law, you're doing it. What is it at the barrel of a gun? I love, I love that. I mean, that's the reality what it is. And so theoretically, if a company wants to hire good employees or wants to create an environment where people want to stay long term or be good employees, you'd say, okay, we're going to have a salary transparency policy. But again, that is to me a private organization's decision. And it could be in their interest to do that, to encourage those conversations. What would you say about the people who would argue against sort of what each of your approaches would be, which are very similar, I think in nature, you're instructing women to go out and get it, negotiate, actually take their career by the horns and just, you know, get what they need. Yeah. And I'm not saying that's easy, but I would imagine it's not easy for a lot of men who engage in salary negotiations either. There's plenty of blogs out there. You can read, get some good tactics. There's ammunition. Yeah. Yeah. And individual women and men too can take that advice to heart and actually act on it. That's small scale, right? So that takes people doing it one on one. When we're talking about individuals, it's all small scale. All politics is local. And then your education campaign with the Anna Jane Perle Foundation for Empowering Women, that's going to take a while, right? Right. So small scale take a while. So there are people who, for very legitimate and earnest reasons, want to have the federal government say, if you are a teacher of three years, you should be paid precisely the same amount, whether you're a man or a woman. What's wrong with that kind of law? So philosophically, we've said we don't want anyone forcing us to do that. So sometimes force can make better choices. I'm putting question marks on that. It's an interesting thing because that seems to be a solution a lot of people are pushing toward these days. Well, the same job description is not necessarily the same what is being paid for. Because again, it all depends on what people on the market are willing to pay. And ultimately it comes down to the consumer. Ultimately it comes down to whether the output of this production is satisfying consumers in a way that's making people's lives better that they're willing to pay for. Just because it's the same job description doesn't mean that there's the same productivity, the value productivity. Sure. It's interesting too because one of my favorite economists who's actually on our wall behind Anna Jane, Nobel Laureate Milton Friedman, he has a video on YouTube. He didn't put it up there. It's of him. And it basically, in it, he's posited with the question, why not equal pay for equal work kind of legislation? Why not? He says what you're doing not intentionally, but by misunderstanding when you try to get equal pay for equal work laws is that you're reducing to zero the cost imposed on people who are discriminating for irrelevant reasons such as race or gender or whatever. And I would like to see a cost imposed on them. And so the point that he's saying is when you make it illegal to have different wages for the same work, you are therefore removing any bargaining power that the person that the boss might be discriminating against had to get the job in the end. You're basically reducing to zero the tax they have for discriminating. And I think that's just a brilliant way of looking at sort of the unintended consequences behind a piece of legislation. So the way that might play out might be if Dan and I both apply for the same job and the person who's hiring maybe has a preference for hiring male employees. If I can't bargain on my salary, then I don't stand a chance. Is that what? That's it. That's exactly right. Well, and also if he chose me for that arbitrary reason, that's going to affect his, the business's success. Because if you were more productive than me, but he chose me anyway, that his business is going to suffer for that. And then someone who was not arbitrary, they're going to do better because the consumer ultimately, they look and they care about quality and price. And the person who made the non-arbitrary economic decision is going to be able to compete better and the consumer is going to choose that person. That's the kind of discrimination that ultimately the consumer has that reduces arbitrary discrimination just based on arbitrary factors. Let's all say it all at once. It's Dan's favorite concept, consumer sovereignty. What were you saying? I was going to say that. I mean, yeah, like Dan was saying, it ultimately, especially in a context now where everything is so public and every decision made by every company is analyzed by people who care on Twitter by every single individual and you are a profit-seeking company, you are motivated not to be discriminatory based on arbitrary reasons. And we just have so much information these days that we can employ to make those decisions that if we sense the slightest bit of sexism, racism, homophobia, whatever, we can choose the person who's not or the boss or the company that's not exercising those prescriptions. Yeah. And with I think kind of what you're saying is that and if we do an equal pay, if we institute some sort of equal pay law, we have now leveled the playing field for both morally-objectible companies if that is what they are doing and that's how you feel and good companies. And so you're giving them an equal playing field to be successful when in reality, maybe they should be, maybe they should incur a cost based on... You're giving them an out. Yeah. And so if you guys believe in your power as individuals, wouldn't you want the playing field to be not necessarily level based on a law, but reflective of reality so that you can make good decisions? Ultimately, you can't coerce people to be moral, to be good. Like if anything, all you're doing is taking away from them the responsibility to choose to be moral. And so that's why a lot of people say like, no, I want to know who the bigots are out there. So that if someone is a bigot, but then that never gets revealed because they're forced to hire in non-bigoted ways, then they never actually learn to not be a bigot because they never actually have to pay for the bigot. Yeah, exactly. Well, we are not going to force our watchers or our listeners to listen or watch us anymore because we have to wrap it up, but it's been a great conversation and it's been a great year. So thank all of you for everything. And of course, Brittany and everyone who was part of our panel ahead of time. And we look forward to seeing everyone in the new year of 2019. Again, check us out on Apple, Google and Spotify and have a great year, everybody. Thanks for watching.