Here.
Closing the gender pay gap would make us poorer?
I can think of ways of doing that that would. But the basic idea itself? Anyone actually pay for the Telegraph? Like to post the piece in comments?
Here.
Closing the gender pay gap would make us poorer?
I can think of ways of doing that that would. But the basic idea itself? Anyone actually pay for the Telegraph? Like to post the piece in comments?
Extract here:
“Those laws aiming to nudge companies into reducing the wage gap between men and women appear to have hit productivity and overall average pay, according to the paper from the Centre for Economic Policy Research.
The gender pay gap did decline by around 2 percentage points but female wages rose by only 0.28 percentage points compared to peers in control firms, a difference that is “not statistically significant”, the paper says.
That suggests the transparency legislation did very little in helping to narrow the gender pay gap, but it did have some negative side effects.
Productivity dropped by 2.5pc compared to control firms following the law’s implementation. The authors suggest this could be because morale among female employees drops after learning of the gender pay gap, or because male workers are dissatisfied with lower wage rises because of the transparency law.”
The study was in Denmark.
OK, so it’s the method, not the fact. Fair enough.
Steve is given £100,000 to split between himself and a stranger, Sarah. Steve decides how to divide the money but if Sarah rejects the split then neither gets any of the cash.
Logic dictates that Sarah should accept any amount even if she is offered a 10:90 split. She would be better off with any split but often she will pull the plug.
Economists believe the perception of fairness can make people not act in their own self-interest in this scenario, known as the Ultimatum Game.
The perception of fairness is a powerful tool in politics. For example, clamping down on the richest for “not paying their fair share” risks pushing them out of the country and losing their tax revenues – yet many voters would gladly pack their suitcases for them.
Fairness in gender pay has raced up the agenda in recent years, particularly in the UK where larger companies have been forced to disclose their gender pay since 2018.
Few would disagree in 2020 that the goal of equal pay between men and women is one we should strive for. But economists studying gender transparency laws in Denmark suggest that fairness is coming at a cost, as Steve and Sarah found out in the Ultimatum Game.
Those laws aiming to nudge companies into reducing the wage gap between men and women appear to have hit productivity and overall average pay, according to the paper from the Centre for Economic Policy Research.
The gender pay gap did decline by around 2 percentage points but female wages rose by only 0.28 percentage points compared to peers in control firms, a difference that is “not statistically significant”, the paper says.
That suggests the transparency legislation did very little in helping to narrow the gender pay gap, but it did have some negative side effects.
Productivity dropped by 2.5pc compared to control firms following the law’s implementation. The authors suggest this could be because morale among female employees drops after learning of the gender pay gap, or because male workers are dissatisfied with lower wage rises because of the transparency law.
The problem is lower productivity hit profits and therefore had a “negative and significant” effect on wages. Firms offset the impact of lower productivity on profits by squeezing wages. The average wage fell by 2.8pc, compared to companies not subjected to the transparency laws.
Now Steve and Sarah are not sharing a hypothetical £100,000 but a shrinking pot of money. For many, that is a price worth paying for a fairer society
The problem with the ultimatum game is the initial research was done in rich countries using students for relatively wealthy universities.
They got completely different results in poor countries and across different cultures.
Just because that was the result in Denmark it doesn’t follow the same will happen elsewhere.
The problem is status. If my mate Bob has a brilliant idea for making money but he can’t do it alone. He offers me 20% to basically hold his coat. I’m reluctant because currently we are equal but if this scheme works he will have higher status than me. My response would be different if the same offer was made by someone I already regarded as being higher status than myself.
They use students! People who not been in the job market or negotiated for a pay rise or promotion. They have no idea what they will think is fair when they have to actually reveal their preferences
‘economists say’
Does this have as much force as “scientists say?”
Yeah. Zero.
The one shot ultimatum game gives an average pay out, varying by culture, status, etc. There is no Nash equilibrium.
An iterated ultimatum game gives radically different results, where the proposer can actually end up with less money than the responder. (See venture capitalists, etc)
For best results the proposer should make his offer to multiple responders and take the best offer via an auction.
However, when the firm gets involved, the roles are reduced and transparency makes reputation as important as the money. So the aggregate pay out(s) will be lower.
@Roué le Jour
My brother – who is not a leftie, but is selfish – suffers from the “I’d rather have 100% of nothing than see him have 80% and me 20% of profit” syndrome. Applies even if he is still higher status.
I run a business, yet he’d rather and does pay Joe Bloggs £1,000 rather than pay me £100 as he says “I should do his work for free, even if costs involved”. His loss
Thank God he’s not a Dragon on BBC, he’d only invest if he could have >50%