If women make $0.70 for every $1.00 a man makes, and women are underrepresented in many lucrative fields, then: an arbitrage opportunity necessarily exists.
In other words, if there is systemic sexism, then there exists a profit opportunity for entrepreneurs to buy-up typical companies and replace expensive, scarce male labor with cheaper, less-scarce female labor.
I would love to hire female employees who are every bit as driven, thorough, methodical, and accountable as our best male employees (the ones we don't fire), who are also cheaper. But they do not seem to exist.
The rare female prospective hires who are available and seem good are often priced so high I assume their rates are the result of Fortune 500 companies competing over them to have an effective female on the team. Good for them, but until effective females become cheaper than effective males it doesn't make sense for us to hire them from a value perspective (we don't need the social signaling points).
However if it is Tech or some similarly male dominated field then of course competent women can charge more because they are more in demand. But that is in those specific fields and doesn't explain away the lack arbitrage opportunity from hiring women in general if they are indeed paid less in general.
Certainly, there were some people who took advantage of those arbitrage opportunities to some extent. But in the case of anti-black racism, it truly was a case of human prejudice outweighing market incentives, for a very long time.
Today, if there is a pay gap it would be exploitable, no? Salaries are typically the by far the most expensive cost for most tech startups. Discrimination against women is illegal and socially shunned today. So what's stopping entrepreneurs from arbitraging this opportunity?
I think Jesse Lee Peterson might have something to say with regards to that. I suspect that there were perceptive people who took advantage of societal conditions and hired industrious people for less money.
But in the case of anti-black racism, it truly was a case of human prejudice outweighing market incentives, for a very long time.
According to Thomas Sowell, with some kinds of work, some American slaves were paid additional bonuses for certain kinds of work requiring care and attention to detail. Otherwise, the proper level of motivation couldn't be maintained even through torture. Biases certainly can distort market forces, but the market forces will also bend society. Southern bus and train lines were opposing Jim Crow laws quite early on because they didn't want to spend money on extra vehicles/train cars.
> I always valued men and women equally, and I found that because others did not, good women economists were cheaper than men. Hiring women does two things: It gives us better-quality work for less money, and it raises the market value of women.
But in order to arbitrage this, you have to be willing to pay women and men differently. It's not impossible to see a market where everyone internally values work equally, but believes the market does not, and thus all lower their offers made to women.
> But in order to arbitrage this, you have to be willing to pay women and men differently.
A very simple way to arbitrage it without discriminating is to set your wages somewhere between what others pay men and women. Women will flock to you, as you pay better than elsewhere, while men will tend to leave to the discriminating jobs. You pay everyone the same, but the result is your cost in wages is lower than your competitors'.
Also, the discriminating employer is presumably not discriminating openly, or they will be sued. So there is limited information on your part to find the right pricing for just women.
Wages are also sticky, it is hard in many industries to blanket cut them across the board without a real cost to morale and the quality of the labour you attract.
In practice I cant imagine a real firm that could execute on this strategy.
Because pool 1 believes that gender is not a significant factor, they know that wage discrimination on the basis of that factor would be illegal and open them up to lawsuits. Pool 2 does think gender is significant, maybe indirectly laundered through other things like personality assessments, and they therefore think they can and should act on that information.
Critically it doesn’t matter if the sexist pool is openly sexist or using factors more strongly correlated with sex than job performance (like whether or not the employee looks the mental model of the part). The result is the same, they believe they are justified in paying women less. The arbitrage opportunity would never occur to them because they don’t think the labour is worth more.
But if you see the arbitrage opportunity, that puts you in Pool 1 by definition. And so those who are aware of the opportunity know that it would be illegal since the gender isn’t relevant to their position.
So you don't need to engage in wage discrimination to hire women, since that is evaluated within a company, not in relation to a sector has a whole. That is, if McDonald's pays all their employees $10 an hour and they are mostly women, and Burger King pays all their employees $15 an hour for approximately the same work and they are mostly men, I don't think there is any (legal) claim for discrimination?
If they set wages at $10/hr hoping to capture all the women turned away, they will also fail to capture male employees worth $15/hr. That puts them in the same pool as Burger King. There isn’t an arbitrage opportunity based on gender here.
Assuming that Mcdonald’s and Burger King are the only employers, this also doesn’t get rid of the pricing gap. Women are paid less on average because they are turned away from the higher paying Burger King disproportionately. Burger King thinks what they are doing is not discrimination. Mcdonald’s must also think what they are doing is not discrimination, or they have a vast conspiracy to violate the law. They are both Group 2 companies.
It was group 1 one or a variant thereof that I meant to discuss: this group presumably values women equally to men [1], hence wants to exploit the wage gap as the GP suggested by hiring mostly women and hence getting ~30% more for their hiring dollars.
You proposed that this group would be knowingly paying women less, therefore acting both unethically (depending on your ethical view of the matter, anyway) and opening themselves up to legal liability.
I'm saying that this group can just offer positions close to the lower going rate for women: this would presumably result in them hiring mostly women (and some men due to variance, etc). As long as all hiring and wage decisions are gender-blind however, they would not be discriminating - they are only "passively" taking advantage of the gap via their range of salary offers.
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[1] I.e., to them the wage gap is not logical hence women are being underpaid.
Not just that. That company would also need to offer more workplace flexibility, if we are to believe the study.
The trouble is that the difference starts earlier than that.
Say you buy a tech company with 90% male software developers, aiming to balance it out. Turns out qualified female software developers get paid the same amount, but there aren't as many women with computer science degrees or relevant experience.
You could go round up some lower-paid women with no qualifications and train them to be software developers, but you could also do the same thing with lower-paid individuals with no qualifications who are of any gender. The problem in both cases is that once they're qualified for the higher paid work, you have to pay the higher salary or they can quit and go work for someone who does.
My guess is that even assuming a perfectly rational employer (with no unconscious bias), the viability of this sort of arbitrage would depend on women _costing_ $0.70 to the dollar to their employers when compared to men, not on women _earning_ $0.70 to the dollar.
I'm not at all knowledgeable about how this is usually handled in the US, but what I've heard from entrepreneurs in Brazil (where I live) is that despite the fact that maternity leave here is paid for by our social security system, it still ends up incurring in additional costs to the employer, mainly because they need to hire/train a temporary replacement. (Who will most likely be less effective/productive than the more experienced person who took the leave)
Even if the law got updated to grant both genders the same parental leave time (or to allow a shared amount of months to be split by the parents in however way they prefer) it would still require a significant cultural shift to have men actually _choose_ to take the leave. (Anecdotal evidence: I've talked to several local male peers and most of them said they would not bother taking paternal leave even if available, and would rather stay at work)
This sort of market/cost-driven decision making is obviously not good from a moral perspective, and is especially unfair with women that don't want or can't have children, or would rather have children but take a shorter or no leave. However, I also understand that a lot of businesses have very thin margins and fierce competitors, so taking the actuarial calculation approach to estimating how much an employee will 'cost' you might be something they perceive as their only take on surviving.
I'm not sure on what is the best way to (re)align the incentives so that this doesn't happen anymore and the gap is closed for good.
EDIT: what other commenters have pointed out also makes a lot of sense: exercising this sort of arbitrage in the first place would likely require the use of immoral and probably illegal discriminatory practices
Anecdotal: I have a coworker campaigning to have the company let him take paternal leave.
In general, the pay gap due to discrimination is much smaller than the total pay gap. It's also not universal: it varies by city and occupation. If you're evaluating two employees who seem about equally qualified and one asks for a 30% lower salary, it's easy to see the arbitrage opportunity. But if the employee is only asking 5% less? It's less obvious. You may have felt from the interview that the other candidate was 6% better overall.
Then consider that discriminatory employers may not be evenly dispersed. In towns without much discrimination, there may be no arbitrage opportunity. In towns with heavy discrimination, there may not be enough non-discriminatory employers to hire all the undervalued workers.
But the biggest issue with that is: you basically wrote "if there is systemic sexism, there's profit in exploiting that". Why would anyone want to work for you in that case? You're not improving the situation, and benefit from it continuing - that's what's wrong with the idea.
Even if there really was a pay gap of that magnitude, it could still persist in the short run (compare to, "in the long run we are all dead"). The wonderful thing about high-prestige fields is that nobody really knows how to measure productivity.
There's also the possibility of bias in school or training programs, which would lead to differences that the labor market is not responsible for because they exist earlier in the pipeline.
You then realize you could hire 7 equally competent female devs at the exact same price, all this while still offering more money than their supposed current employer who is underpaying them.
If all of this were true the price would shift over time on these margins, and this "gap" would disappear.
Why is it that we must constantly slice up society on demographic lines, point out a statistical in-congruency with some ideal (non-extant) world, and then claim some third party is culpable for causing this?
If women were malevolently directed away from a field by educators, families, or traditions, why is it now an employer's responsibility to calculate said deficit in interest for a field and allocate resources sub-optimally in one direction or another for the sake of aligning statistics on some dubious spreadsheet?
Don't tell women no, encourage them in what they want to do in life, and if in the end they don't choose the path that aligns with your macroeconomic utopia... get over it.
You then realize you could hire 7 equally competent female devs at the exact same price
In reality, the likely outcome is that the 7 women would end up working at Google, who can and will gladly way out-compete you on salaries, and you end up hiring 7 quirky men, then firing a few of them.