Tuesday, March 23, 2010

Milton Friedman in 1978 Discussing Equal Pay Act



"The free market, by enabling people to compete openly, is the most effective device that has ever been invented for making people pay for their prejudices, and thus for making it costly for them to exercise it. What you do when you impose equal pay for equal work law, is that you make the expression of prejudice costless, and as a result you harm the people you intend to help."

Thanks to Matt Bixler.


12 Comments:

At 3/23/2010 3:23 PM, Anonymous Lyle said...

Note that in the Lilly Ledbetter case there were charges of give me sex for a raise involved. Its not clear when that happend, but today its a big no no. Every large company requires sexual harrasment training, and due to the high liablity involved if the company is found to have allowed it, there are hot lines that go directly to HR. Now clearly today we may have this for males as well. I would go further to say that no romances allowed between superiors and subordinates, subject to the superior being transferred.
The equal pay act just makes it simpler to sue, a disparity makes you guilty. So companies in their HR operations need to compare wages, and HR needs to ensure documentation of all things. (It was that way at the mega corps I worked at, HR did a lot of looking over shoulders of bosses)

 
At 3/23/2010 3:49 PM, Anonymous Benny The Man said...

It is interesting to ponder a free market, without sexual harrasment laws.
Suppose your wife comes home in tears. Her boss just told her to put out or get fired. You have kids and a mortgage.
There are no free market solutions to this event.

That said, I am dubious about equal pay.

It would also be nice to see a reasoned discussion of Milton Friedman's favorite type of tax--the progressive consumption tax. I believe that if MF were alive today, and looked at the mountain of debt we have, he would propose a balanced budget, and no tax increases other than a progessive consumption tax.

Oddly enough, the fact that MF was a fan of the progressive consumption tax is rarely, if ever mentioned in right-wing circles. Or that he detested the homeowner mortgage interest tax deduction.

 
At 3/23/2010 7:41 PM, Blogger juandos said...

"So companies in their HR operations need to compare wages, and HR needs to ensure documentation of all things"...

Yet another tax on business and more ongoing theft of the stockholders and employees...

The Consumption Tax: A Critique

Mises Daily: Friday, March 18, 2005
by Murray N. Rothbard

(skip)

During World War II, in order to permit an easier and far smoother collection of the far higher tax rates for financing the war effort, the federal government instituted a plan conceived by the ubiquitous Beardsley Ruml of R.H. Macy & Co., and technically implemented by a bright young economist at the Treasury Department, Milton Friedman. This plan, as all of us know only too well, coerced every employer into the unpaid labor of withholding the tax each month from the employee's paycheck and delivering it to the Treasury. As a result, there was no longer a need for the taxpayer to cough up the total amount in a lump sum each year. We were assured by one and all, at the time, that this new withholding tax was strictly limited to the wartime emergency, and would disappear at the arrival of peace. The rest, alas, is history...

 
At 3/23/2010 9:43 PM, Anonymous Anonymous said...

I liked the story of the guy that got called in on sexual discrimination charges.

Look, he said, I've got 32 women working for me. I asked 16 to sleep with me and 8 of them did.

Of the eight that slept with me half got raises and half didn't.

Of the eight that didn't, half got raises and half not.

Of the ones I didn't ask, half got raises and half didn't.

Where is the discrimination?

 
At 3/23/2010 10:23 PM, Anonymous Anonymous said...

@Benny The Man

"the fact that MF was a fan of the progressive consumption tax is rarely, if ever mentioned in right-wing circles."

That's probably because he wasn't in favor of a progressive consumption tax.

 
At 3/23/2010 10:59 PM, Blogger Ron H. said...

>"It is interesting to ponder a free market, without sexual harrasment laws.
Suppose your wife comes home in tears. Her boss just told her to put out or get fired. You have kids and a mortgage.
There are no free market solutions to this event."


Nonsense. This has nothing to do with a free market, and a number of solutions present themselves. Extortion is illegal in and out of the workplace.

The wife could secretly record her boss's threats (ala James O'Keefe and Hannah Giles at Acorn offices). This evidence could then be presented to the local District Attorney, and/or upper management at work. Few businesses want this type of negative impact on a productive workforce, so the offending boss would be gone.

She would not likely be the only victim of this boss, so others might be found to corroborate her charges, even without any video or audio evidence.

Another more satisfying solution might be to contrive an unexpected encounter with the boss in a private setting where you would not be interrupted or seen. You would then place your Glock 9mm against his forehead, and advise him in a calm, steady voice that the next time your wife had any slight complaint about him would be his last day on earth.

If you have the cojones to do this, he would certainly believe you, and perhaps promote your wife out of his department.

Another solution might be for the wife to record his threats as in the first solution, but then agree to his demands, have sex, and record that also. She could then blackmail him for a big raise or better job.

See, that was pretty easy. Lots of solutions without relying on harassment laws.

What do you suppose people did before such laws existed?

 
At 3/24/2010 9:46 AM, Anonymous Anonymous said...

Suppose your wife comes home in tears. Her boss just told her to put out or get fired. You have kids and a mortgage. There are no free market solutions to this event."

She could simply leave her job and go to work for his competitor for an equal or lower wage. If it's an equal wage, her circumstances have improved. If it's a lower wage, she gives her new employer an advantage over her old harassing employer. One the harasser will now have to pay for in his loss of competitiveness.

 
At 3/24/2010 11:31 AM, Anonymous Benny The Man said...

Ron H-

The solution you you suggest is a good one--but not a free market solution., It involves the apparatus of the state, and the application of law. It would mark a state intrusion into a free market transaction. In a free market, the female employee can choose to quit..which brings us to anonymous' correct answer.

Yes, the female employee (your wife) can quit, and we can hope she joins another company, and thrives.

But, in the real world, I am not so sure about this. Suppose an excellent chef-restauranteur has a dining establishment. Your wife is one of many good-looking waitresses, or the accountant.

The restaurant is a success due to the cooking and ambiance. Your wife quits, but the establishment thrives anyway.

Back to Ron H:

"Another more satisfying solution might be to contrive an unexpected encounter with the boss in a private setting where you would not be interrupted or seen. You would then place your Glock 9mm against his forehead, and advise him in a calm, steady voice that the next time your wife had any slight complaint about him would be his last day on earth."

This is a most interesting solution, but may have legal repercussions. Be sure to keep the safety latch on.

It is the supreme free market solution in some ways.

 
At 3/24/2010 1:39 PM, Blogger ExtremeHobo said...

@Benny

" It involves the apparatus of the state, and the application of law"

You are confused at what free markets are. Both of these exist in free markets. Laws to protect your home from robbers and murderers and state to enforce said laws. You are referring to anarchy.

 
At 3/24/2010 3:40 PM, Anonymous Lyle said...

The comment is well taken a free market requires a cop on the beat. Without a cop if someone robs you your out of luck. Being robbed is not part of a free market but anarchy. If a free market allows one person to take advantage of another then its not a free market its a kleptocracy. (See Russia). A free market is dependent upon the state setting up rules to play by. Otherwise we go back to feudalism and getting a protector.

 
At 3/24/2010 9:47 PM, Blogger Ron H. said...

Benny, thanks for the tip. I'll be sure to keep the safety on. :-)

My point was that extortion is illegal, as are theft, murder, and many others harmful activities. Enforcing them is a legitimate function of government, along with enforcement of contracts and protection of private property rights.

The example you gave of an evil boss just happened to involve the workplace, but isn't really a market problem. The threat used could just as easily have been "Put out or I will kill your kids."
or "put out or I will burn down your house.

This type of transaction isn't a free market problem, as it involves the threat of force. In a free market (hence the word FREE), every transaction is voluntary.

 
At 3/25/2010 12:03 AM, Anonymous Anonymous said...

Under the free market "put out and I'll give you a raise" would be permissible. Effectively you would be adding a new responsibility to your job, in exchange for higher pay.

Separately, if you are working as an construction worker, and your boss comes and tells you that he needs you to empty the porta-potties as well, he can threaten to terminate you if you refuse the new responsibilities.

So why is it different when the new responsibility is sexual instead of menial?

Food for thought, not an argument in favor of sexual harassment :)

 

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