Wednesday, July 31, 2013

The Myth of Female Wage Discrimination

An article posted on uses data from The National Women’s Law Center’s website that purportedly shows the gender “wage gap” of each U.S. State. The state identified as having the largest wage gap is Wyoming, with women being paid $0.67 for every $1 paid to a man. The smallest gap is in Washington D.C., with women being paid $0.90 for every $1. Fortunately for women this study is completely bogus.

The wage gap measured by The National Women’s Law Center is calculated as “the ratio of female and male annual median earnings for full time, year round workers”. Simply put, they are dividing the female median earnings by the male median earnings in each state and claiming that the resulting number (something less than one) means that women are being discriminated against. The problem is that this is an apples to oranges comparison. If I took the median earnings for maids/house cleaners (primarily women) and divided it by the median earnings for policemen (primarily men) I would certainly get a number less than one. But would anyone claim that this is a discrimination problem against maids and in favor of policemen? Of course not. The jobs are completely different, with varying risk structures, training requirements, and demand. But this is exactly what The National Women’s Law Center is doing and then portraying it as discrimination. Claiming a discriminatory gender wage gap based on aggregate data that does not at the very least control for occupation, experience, and schooling is dishonest and dangerous.

Neither economic theory nor data support the claim of systematic, widespread gender wage discrimination. Unfortunately faulty policy, like the Lilly Ledbetter Fair Pay Act, is largely based on erroneous aggregate studies such as this one.  In fact, anti-wage discrimination laws such often work against the women they are trying to help since they make it more expensive to hire them on the margin. If an employer is indifferent between hiring a man and a woman for a job but knows that there is a chance that the woman might one day sue for pay discrimination that would be costly for the employer to disprove it makes sense to hire the man.

Wage discrimination is a myth based on poor studies. Organizations like The National Women’s Law Center are doing women a disservice by constantly resurrecting this straw man. In reality anti-wage discrimination laws only add to the costs of doing business for employers, which is hardly something this country needs in a time of high unemployment. 

Monday, July 29, 2013

Urban food deserts

Albert Klein correctly points out that the recent trend of urban farming is inefficient from an economic point of view and that in a best case scenario urban farming is a second best solution for eliminating food deserts. Vacant lots in dense urban areas are close to public infrastructure like roads, plumbing, trash pick up, electrical lines, etc. as well as a supply of customers. To use such valuable land for a low value use like farming, an activity which can be done efficiently far from city infrastructure, underutilizes resources.

However, his solution that city officials tax developers who fail to build and subsidize grocery companies in order to encourage them to build on these vacant lands is unnecessary. Developers would certainly prefer to have their land developed and earning them a profit rather than sitting empty. And the recent Wal-Mart in DC case shows that companies are often willing to build in underserved areas. In fact the DC case exemplifies what in my opinion is the biggest hurdle to urban development in many areas; too much government zoning and regulation.

Too often city planning departments and officials are captured by special interests that encourage them to keep certain companies out that they don't like. City officials that get out of the way and allow companies to build on land where they see the potential for profit would help to reduce the number of urban food deserts in this country with no subsidies or penalties required.

Tuesday, July 23, 2013

Arlington Should Say No to a Government Housing Authority

Housing prices in Arlington County continue to climb and it is becoming increasingly difficult for relatively low-income earners to live there. In an attempt to increase the amount of affordable housing the Arlington Green Party has collected enough signatures to bring the question to voters of whether to create a government housing authority to address the issue. Hopefully the voters of Arlington will reject this idea as they have in the past since more government is hardly the answer to a government created problem.

The Green party states that the creation of a government housing authority will make Arlington eligible for federal handouts and tax credits that will allow them to subsidize housing for low income earners. But these “solutions” just mask the problem; they do not solve it. The federal government is going broke and counties like Arlington should not count on taxpayers from around the country subsidizing their housing forever. They need to come up with their own local solutions, which involve reducing the government’s influence.

Arlington, like many places in the D.C. metro area, already has too much government intervention in the housing market. Arlington County has an entire website, Building Arlington, devoted to helping people navigate the 38 section zoning ordinance, an ordinance that includes 5 sections on “One-Family Dwelling Districts” alone. A homeowner needs 4 permits just to renovate their kitchen! Complicated zoning ordinances and excessive permit requirements dramatically increase the costs of producing housing. Minimum lot requirements like those found in the Arlington ordinance force builders to construct housing that is too large, and thus too expensive, for many buyers’ preferences. These government created hurdles are the real deterrent to affordable housing.

Rather than create another government agency that will only further complicate an already complicated housing bureaucracy the voters of Arlington should push for a liberalization of the local housing market. Let the producers and consumers of housing work together to find the solutions that fit each person’s individual preferences. Lot requirements, height restrictions and other zoning barriers reduce the supply of housing, especially at the bottom end of the market. This results in higher prices that reverberate upwards making housing more expensive for everyone. If the voters of Arlington really want more affordable housing they will let the market work.

Wednesday, July 17, 2013

Are people still paid their marginal product?

Economic theory says that people are paid their marginal product of labor and for a long time the data backed this up. Then in the 1970's it appeared that wages and productivity were diverging. A new study by the Heritage Foundation shows that when total compensation is considered, rather than just wages (the true cost of a worker is not just their money price), and a different yet likely more correct measure of inflation is used, economic theory indeed holds true.

Sallie Mae and Crony Capitalism

See my blog post on about Sallie Mae using a federal line of credit for private gain.

Monday, July 15, 2013

Middle class is movin' on up

Here is a post from Mark Perry about the disappearing middle class. He presents census data that shows that the shrinking proportion of people in the middle income bracket is due to people moving up into a higher income bracket, not down.