Mike Kueber's Blog

July 13, 2015

Sunday Book Review #163 – The Silencing by Kirsten Powers and Inequality by Anthony B. Atkinson

Filed under: Book reviews,Economics,Politics — Mike Kueber @ 12:57 am
Tags: , , ,

The Silencing describes how the left is killing free speech in America.  They do this by attempting to ostracize and punish anyone who holds a contrary political opinion.  The most common technique used by the left is to demonize the offender as bigoted, racist, sexist, etc.  When the left is charged with intolerance of alternative opinions, they respond that these issues are already settled within civil, mainstream society.  When the left is charged with killing free speech, they say that speech will continue to be free, but civil society is similarly free to levy punishment on those who stray far from the so-called mainstream.

I’ve always been a bit of a devil’s advocate, and The Silencing motivates me to redouble my efforts.  It also makes me feel a bit of shame for my reaction against the Dixie Chicks after lead singer Natalie Maines said some mean things about George W. Bush.  I’m sorry they are no longer making great music that I loved.

Inequality reminds me of one of my favorite books from last year, Capital in the Twenty-First Century by Thomas Piketty, a French economist.  Piketty explained why the world economy was moving toward greater income inequality (r>g; return on capital was greater than the growth of economy) and provided some common sense solutions, such as increased education subsidies, greater progressivity in personal taxes, and reduced corporate tax loopholes.

Although Piketty’s analysis and proposals might seem radical to some conservatives, his tone was so nonpartisan that he persuaded me to see him as a reasonable man.  Atkinson not so much.  He is a British economist who reportedly mentored the younger Piketty on inequality, but his focus is more on the elimination of poverty, which seems to produce more draconian socialistic proposals.  Among them:

  • New technology should be developed in ways that encourage greater employment, not less.
  • Greater power to labor vis-à-vis capital.
  • Jobs guaranteed for everyone.
  • Minimum wage should be a “living wage.”
  • Guaranteed return on capital saved by low-income individuals.
  • Large inheritance granted to all individuals upon reaching majority; funded by wealthy.
  • Increase state ownership-participation in private companies.
  • Progressive taxation, up to 65%.
  • Increased estate tax and a new tax on wealth.
  • Payments to parents for having children.
  • Increased social security.

Although Atkinson seems quite bold in his willingness to interfere with capitalism, I confess to being intrigued by several proposals.  Especially interesting is the proposal to grant a large sum of money to all young adults, funded by a robust estate tax and an annual tax on wealth.  I think the first-world countries can afford to give their young adults a jump start on their life to think and act like a capitalist.

Advertisements

May 21, 2015

A world-class consumer

Filed under: Economics,Philosophy — Mike Kueber @ 11:13 pm
Tags: ,

Last week, I got into two separate philosophical arguments with two of my best friends over whether it was wrong to spend a lot of money on materialistic things.  The arguments were prompted by an anti-religion Facebook attack on a Houston pastor living in a $10.5 million house.

Neither of my friends thought it was wrong for people to spend boatloads of money on themselves, although one friend who was brought up in the Catholic/Jesuit tradition believed such spending was inappropriate for a man of the cloth.  And the other friend, more of an Evangelical guy, begrudged the Houston pastor as a charlatan.

I disagreed with both of my friends on the general practice of spending lots of money.  I don’t recall when, but at some point in my life, I came to the opinion that it was sinful to use an inordinate share of the world’s resources.

I guess this philosophy started with my Catholic upbringing.  We were taught that it was admirable for priests to take a vow of poverty.  Then a few years later during high school and college in the 60s and 70s, I was taught the evil of conspicuous consumption.  Although that concept had been around since the 19th century, it reached the height of ridicule in the 60s. And finally during law school in the late 70s, there was an oil crisis with long lines at the gas pumps and talk of rationing.  During that time, a person did their civic duty by self-restricting their use of gas, and many even considered this a patriotic duty because of our nation’s reliance on imported oil from the Middle East.

In the past few years in San Antonio, my philosophy have been reaffirmed in the context of water usage.  Because our city seems to be continually on some sort of drought restrictions, there is community pressure to reduce water consumption.  The local paper, the Express-News, does its part by periodically doing an article that exposes the biggest private water users in town, with headlines shouting that the profligates are using 10 to 20 times as much water as a typical household.  Not surprisingly, those exposed are apologetic and promise to do better in the future.

Because of all of these life’s experiences, I have gradually settled into a position that ethical people shouldn’t feel entitled to deplete an inordinate amount of resources, even if their income or inheritance allows for it.  It isn’t just oil and water that are limited resources.  Our entire economy produces a limited amount of resources, and in that context it doesn’t seem fair or just to consume 10 or 20 times as much as a typical household.

So, what are successful people to do with their good fortune?  Obviously, they could use it to help others, but if philanthropy is not in their nature, they can retain the capital as productive assets.  As Thomas Piketty pointed out in his classic book, Capital in the 21st Century, the world economy remains out of balance with too much labor and not enough capital, so increasing our savings rate will help everyone.  Plus, with a healthy estate tax, larges estates will provide government with a relatively painless way to fund the necessary governmental services.

In Downton Abbey, the aristocratic Dowager Countess haughtily attempted to justify her use of servants:

  • An aristocrat with no servants is as much use to the county as a glass hammer.”

In her mind, providing employment to servants was a noble thing for aristocrats to do.  I love Countess Grantham in the TV show, but her thinking is outdated.  Employing a slew of servants to wait on you is, not only demeaning to them, but also corrosive to you.  As Jean Knight sang a big hit in 1971, “Mr. Big Stuff, who do you think you are?”

February 23, 2015

Paul Krugman gets serious

Filed under: Economics — Mike Kueber @ 9:18 pm
Tags: , , ,

When I ran for public office a few years ago, I argued that there were two dominant problems in America that needed to be addressed:

  1. Growing debt.
  2. Growing economic inequality

My proposed answers were (1) government austerity, and (2) education. Today in his column, NY Times columnist Paul Krugman mocked both me and my positions:

  • “Regular readers know that I sometimes mock ‘very serious people’ — politicians and pundits who solemnly repeat conventional wisdom that sounds tough-minded and realistic. The trouble is that sounding serious and being serious are by no means the same thing, and some of those seemingly tough-minded positions are actually ways to dodge the truly hard issues.”
  • “The prime example of recent years was, of course, Bowles-Simpsonism — the diversion of elite discourse away from the ongoing tragedy of high unemployment and into the supposedly crucial issue of how, exactly, we will pay for social insurance programs a couple of decades from now. That particular obsession, I’m happy to say, seems to be on the wane. But my sense is that there’s a new form of issue-dodging packaged as seriousness on the rise. This time, the evasion involves trying to divert our national discourse about inequality into a discussion of alleged problems with education.”

Regarding inequality, Krugman suggests that instead of being distracted by education issues, government efforts for greater equality should focus on increasing taxes on the rich, increasing benefits (so-called investments), and thing like increasing the minimum age and facilitating more unionization.

Since reading Piketty’s book on Capital in the 21st Century, I have revised my inequality thinking in favor of more structural reforms such as what Krugman is suggesting. Free-market capitalism needs to be tweaked to produce the results that we as a country want. Results, not economic philosophy, have to be the ultimate objective.

Piketty’s book also convinced me that the most effective way of dealing with our national debt is not austerity, as Europe has tried, but rather to grow our way out – i.e., restraining the growth of spending.  But I’m not sure Bowles-Simpson equated to austerity.

Also, one mocking statement by Krugman really sticks in the craw of this life-long insurance guy:

  • “… the supposedly crucial issue of how, exactly, we will pay for social insurance programs a couple of decades from now.”

 

As an insurance guy, I think it is silly not to worry about how you are going to pay for insurance obligations (Social Security, Medicare) that come due two decades from now

January 28, 2015

President Obama as Redistributor in Chief

Filed under: Economics,Law/justice — Mike Kueber @ 12:37 am
Tags: ,

Amity Shlaes authored a column in Time magazine this week titled, “Redistributor in Chief.” You might guess she is referring to President Obama, and you would be correct.

Redistribution,” of course, is an ugly term that most conservatives use to tar any proposal that shifts government taxes from poor to rich or any government benefits from rich to poor. Although I style myself a conservative, I believe that each proposal needs to be examined on its merits.

In her column, Shlaes provides a litany of evil Obama proposals, and I agree with her on many of them. But one of her criticisms stuck in my craw:

  • Even more damaging is the President’s plan to kill the “step-up in basis” for inherited wealth. Some non-rich families have a second home somewhere in the woods. Obama’s plan would force many children to sell such a house to pay the taxes due upon a parent’s death.

I blogged about my support for killing the “step-up in basis” when Obama first proposed it. It makes no sense to evade capital-gains taxes merely by passing the property upon death.

But instead of trying to defend the indefensible, Shlaes resorts to a red herring fallacy. How many “non-rich families have a second home in the woods”? Not very many when compared to all of the rich families that evade paying capital gains on appreciated stock by transferring the stock through an estate.

Shlaes’s silly example reminds me of liberals and progressives who argue against Voter-ID laws because there is a widow in west Texas without an ID and she would have to travel over 60 miles to find an agency that could provide her with one.

January 19, 2015

My third pet peeve in government

Filed under: Economics,Issues,Law/justice,Politics,Retirement — Mike Kueber @ 11:01 pm
Tags: , , ,

I recently posted about a progressive Facebook friend who is displeased with SA’s mayor, Ivy Taylor. She also is displeased with her redneck in-laws who, despite their antipathy toward welfare, are not above keeping a cow on their acreage to avoid paying any significant property tax.

While I’m not judgmental re: people who energetically try to avoid taxes, I have previously blogged about my disgust with the farm/ag exemption.  The ag exemption, along with the obscene pension plan that state legislators have provided themselves, are strong evidence of the corruption involved in government.

To my list of pet peeves in government, I am adding a third item – long-term capital gains. These gains are currently taxed at 15% for most people, which is a compromise between some people arguing that these gains should be untaxed and others arguing that these gains should be taxed the same as ordinary income.

I agree with the latter position, but even if I understand the compromise, I don’t understand why the tax code would allow an estate to transfer to its heirs capital assets not only without assessing a tax on its capital gains, but also with its cost-basis increased to its current market value. What uncorrupted legislator would think that makes sense?

For some reason, I’ve never heard this grotesque policy discussed, let alone discussed. Imagine my surprise a couple of weeks ago upon hearing that President Obama is proposing to seek a middle-class tax cut that will be paid for by assessing a capital-gains tax on inherited property.

I look forward to hearing how the Republicans argue against this proposal. Mitt Romney is opening his campaign with an emphasis on helping the middle class, and I would love for him to adopt this proposal.

October 16, 2014

The role of personal responsibility in America’s unequal distribution of wealth

In response a Facebook friend endorsing Bernie Sander’s attack on the Walton wealth (Walmart) and the resulting poverty at the bottom, I suggested as follows:

  • And the bottom 25% of American families have a negative net worth. I agree that something has to be done to keep all wealth from going to the top 10% (an annual wealth tax to supplement or replace the estate tax), but the bottom 25% need to be more personally responsible.

Not surprisingly, my response generated some emotional stories about personal hard luck, to which I responded:

  • Some of life is a crapshoot; some of it is bad decisions. I’m all for creating more opportunity for those who are so motivated, but for 75 million Americans to save nothing sounds like a lot of bad decisions.

Surprisingly, one commenter seemed to think I should propose a solution, as though personal responsibility was not one:

  • Mike, for you to make the statement, “…but the bottom 25% need to be more personally responsible”, baffles me! What kind of propositions, that those 25%, do you suppose would work? Enlighten me please!

When I didn’t immediately respond to the request (I had gone to the gym), my Facebook host jumped in:

  • I think he baled (sic) once we got by his stereotypes and anecdotal examples and asked for empirical evidence to support his generalizations.

And one of his partners-in-crime seconded the motion:

  • They usually do!

When I returned from the gym, I reentered the fray:

  • Excuse me, Terry, I didn’t bail and I’m not the one who gave anecdotal examples of victims who have not been able to save any money. My point is that 75 million people have been living beyond their means. The savings rate in America at one point dropped to zero, and I believe many people in tough times stubbornly refused to reduce their standard of living and instead chose to maintain their standard of living by going into debt. I believe the majority of that 25% could have saved something if they had the willpower to defer gratification and control their impulses. Re: empirical evidence – I don’t know what would confirm or refute that.

After a few more comments, my Facebook friend tried to put a wrap on this discussion:

  • You truly do need to walk a mile in another man’s shoes. I have seen many a middle class principled conservative change their tune when they suffer sudden job loss or catastrophic illness. You act as if austerity and poverty are choices. Any social study will tell you that geographical location and parental status are the true determinants of what a person’s economic status. For example, the starting point for Mitt Romney’s children economically is a lot smoother and shorter than that of a child born to a black single mother in Detroit. Poverty is a very complex issue that is deep rooted and not conducive to stereotypes and generalizations. It’s funny that conservatives try to blame social ills on those who have the least and are defenseless against. Marie Antoinette failed to realize that until it got to the boiling point. Even companies are now realizing the economic perils of wage stagnation and wealth inequality, which is not because of a lack of labor but by corporate exploitation. I know that you won’t but I suggest that you read The American Way of Poverty by Sasha Abramsky. It will both shock but educate you on the morass that is poverty.

I tried to put a wrap on it, too:

  • OK, I accepted your challenge by putting a hold on the Abramsky book in my branch of the SA library. Based on some of the comments to your posting, it appears your use of the word anecdotal escaped understanding by some people. Obviously, there are thousands of “anecdotal” situations where a person couldn’t qualify for health insurance and then had a medical catastrophe that bankrupted them. But there are thousands of other situations where a person choses a big car payment instead of buying health insurance or refuses to downsize from their 3000-sq.ft. house after losing their job. Bottom line – (1) structural problems should be addressed by raising taxes on the wealthy and affluent, but don’t demonize them just because they are economically successful in the system that our democracy has established, and (2) personal responsibility (i.e., looking to improve yourself instead of blaming others for your problem) needs to be encouraged and perhaps the Abramsky book will provide some suggestions because the current war on poverty since LBJ has been an abysmal failure.

Although I disagree with most of the comments, I do look forward to reading the Abramsky book. It is a bit glib on my part to argue in favor of personal responsibility without thinking through the means to achieve that. Government austerity alone will perhaps not suffice. Indeed, increased taxes on wealth and affluence and increased spending on opportunity (pre-K and college) might increase morale and lead to more personal responsibility.

 

 

 

October 15, 2014

Sunday Book Review #147 – Capital in the Twenty-First Century by Thomas Piketty

Filed under: Book reviews,Economics — Mike Kueber @ 6:23 pm
Tags: ,

My first exposure to Capital in the Twenty-First Century by French economist Thomas Piketty was a few months ago in a Time magazine book review. The review suggested three main points:

  1. Based on Piketty’s review of historical records going back hundreds of years in 30 countries, he has concluded that income inequality almost always gets worse because, “Since the rate of return on capital is naturally greater than the rate of growth in the economy as a whole, people who get most of their wealth from investments inevitably grow richer compared with those who get their money from economy and wages.” The only exceptions are war or direct governmental intervention. That makes sense.
  2. Reform in the tax code must do more than tinker with progressivity; rather, it must consider wealth as a whole, such as real property and intangible assets. Warren Buffet’s tax rate should not be less than his secretary’s. That makes sense.
  3. Other measures to reduce inequality include boosting access to education, increasing capital-gains taxes, and closing corporate tax loopholes. That makes sense.

I recently skimmed the 577-page book and noted the following additional insights:

  1. Progressive taxation. There are four principal types of taxes – taxes on income, capital, and consumption, plus a relatively new tax for social-insurance programs, like social security and unemployment compensation. Surprisingly, these taxes, when combined, are not progressive or even proportional in most countries. In fact, they are regressive.
  2. Obscene executive compensation. Studies show that obscene executive compensation results not from value-added performance, but rather from low tax rates on high salaries – i.e., because executives in low-rate countries get to keep so much of their high salary, they are motivated to negotiate hard for a higher salary. By contrast, if their marginal tax rate was set in the area of 80%, they would continue to work as hard, but wouldn’t care so much about being paid more money. Instead this money would go toward the salaries of their underlings. Piketty specifically rejects my pet theory: “Similarly, the idea that skyrocketing executive pay is due to lack of competition, and that more competitive markets and better corporate governance and control would put an end to it, seems unrealistic. Our findings suggest that only dissuasive taxation of the sort applied in the US and Britain before 1980 can do the job.
  3. Growth of government. Before 1920, most first-world governments taxed about 10% of their national income and provided only “regalian” services – i.e., police, national security, and courts – plus schools and infrastructure. Between 1920 and 1980, government services expanded greatly into social services like health and income replacement (pensions, unemployment, and welfare) and their taxes increased to 30% in US, 40% in England, and 45%-55% in Europe. Since 1980, taxes have plateaued at those rates. Future expansion of government will depend on (a) whether the world economy can resume the robust growth it experienced between 1940 and 1980, and (b) whether governments can prove they can effectively manage their current role in the economy.
  4. Income redistribution. In modern society, income is not redistributed in a direct way, but rather indirectly by government providing baseline services to everyone – e.g., pensions, public schools, and access to medical care. Means-testing these services would threaten their public support.
  5. Education and social mobility. No government has solved the problem of unequal/unfair access to educational opportunities. Some even argue that a meritocracy is inherently unfair because it will continue to reward the upper class and “preserve their hegemony.” Now, that sounds like a bomb-thrower.
  6. Pay-as-you-go pensions (PAYGO). PAYGOs are plagued by low economic growth and plateaued populations. Individuals would be much better off if they had been able to invest their retirement savings because capital grows at a much faster rate than economies or population. But we are where we are, and reforms will need to increase the taxes or decrease the payouts. “One often hears that a public pension is the patrimony of those without patrimony. This is true, but it does not mean that it would not be wise to encourage people of more modest means to accumulate nest eggs of their own.”
  7. Public debt. “There are two main ways for a government to finance its expenses: taxes and debt. In general, taxation is by far preferable to debt in terms of justice and efficiency. The problem with debt is that it usually has to be repaid, so that debt financing is in the interest of those who have the means to lend to the government. From the standpoint of the general interest, it is normally preferable to tax the wealthy rather than borrow from them.” Although Piketty doesn’t specifically describe the “justice” issue, I suspect one major component of injustice would be the disconnect between one generation benefiting from the assumption of debt and a later generation having to repay the debt. Paradoxically, rich nations have more public debt (about 90% of GDP) than poor nations (around 30%).
  8. Paying down public debt. Realistically, public debt can be reduced by (a) a special tax, (b) inflation, and (c) austerity. Unrealistically, public debt can be repudiated. And because public assets are approximately equal to public debt, hypothetically governments could pay off the public debt by selling off the public assets, but that is not realistic. According to Piketty, a special, progressive tax is preferable to the other realistic options in terms of justice and efficiency, but for political reasons, nations often resort to inflation to solve their debt problems. A major problem with inflation is that it is hard to control. An advantage is that it falls primarily on those holding idle money. By far the worst option is austerity, although that is what Europe is currently employing. Fascinating facts – national wealth in Europe is about six times more than national income; private wealth is about 50% real estate and 50% financial assets; Europeans own approximately the same amount of the rest of the world as the rest of the world owns of Europe.
  9. What is the ideal level of national capital? “The maximum level of capital is attained when so much has been accumulated that the return on capital, r, supposed to be equal to its marginal productivity, falls to be equal to the growth rate, g.” This brings us full circle back to Piketty’s initial point that income inequality will become more severe because the return on capital (4-5%) currently far exceeds long-term growth (1.5%). Currently, the most capital-intensive countries have capital that is about six to seven times greater than income. Piketty guesses that capital would need to be 15-30 times income before return on capital would sink to the level of the economic growth rate.

Piketty’s book has caught the attention of the world. As an article in the NY Times reflects, Piketty has become a bit of a rock star (see Bill Gate’s favorable book review), but most economists are skeptical, especially about his signal formula, r>g. I am hopeful, however, that his other insights will result in a more just and efficient world economy.

 

 

 

 

October 14, 2014

Distribution of wealth in America

Filed under: Economics,Facebook,Politics — Mike Kueber @ 10:04 pm
Tags:

The Walton family is being excoriated by socialist Senator Bernie Sanders in a popular Facebook poster because the Walton family apparently has more wealth (about $140 billion) than the bottom 40% of Americans combined. My initial reaction to this charge is there are “lies, damn lies, and statistics” (i.e., a phrase describing the persuasive power of numbers, particularly the use of statistics to bolster weak arguments). After all, most political/economist types know that they individually probably have more wealth than the bottom 20% of Americans combined because those “no-accounts” don’t “have a pot to piss in.”

It was not easy to confirm my suspicion because most studies on the distribution of wealth focus on the top 10%. For example, according to the Credit Suisse Global Wealth Databook (2013), the top 10% of Americans have more of our nation’s wealth (75%) than any of the other 19 leading developed nations, with the others ranging from 44.9% in Finland to 72.2 in Denmark.

After a lengthy search, however, I found a chart on Wikipedia that shows the bottom 25% of American families have a negative net worth of about $2,000.

The conservative in me thinks that, instead of looking enviously at the wealth of the top 10%, America should be thinking about how to inculcate personal responsibility in the bottom 25% who save nothing despite living in our land of plenty. But the me who have been reading Piketty’s book on Capital thinks that these matters are interrelated. So I had the following exchange with my friend who posted the Bernie Sanders poster:

  • Friend – You are under the misunderstanding that these people, the bottom 20%, have some disposable income other than debts. These are people that live below the poverty line. Forty-five million Americans live below the poverty line which is a disgrace for the richest country in the world. And of course we also have the largest income inequality in the world, thanks to companies like Wal-Mart and fast food restaurants including social programs as part of their costs mitigation strategy.
  • Me – And the bottom 25% of American families have a negative net worth. I agree that something has to be done to keep all wealth from going to the top 10% (an annual wealth tax to supplement or replace the estate tax), but the bottom 25% need to be more personally responsible.

I will blog in a few days about the epiphany that Thomas Piketty’s Capital is triggering in me.

May 13, 2014

Sunday Book Review #135 – Capital in the Twenty-First Century by Thomas Piketty

Filed under: Book reviews,Economics — Mike Kueber @ 9:00 pm
Tags:

I have been on the SA Library waiting list for many weeks waiting on “Capital in the Twenty-First Century,” a really hot economics book on income inequality.  Currently, I am #6 out of 87, so my wait is soon over.  But this week, Time magazine provided an excellent review of the book and author, and after reading the article, I feel like I cheated a bit with Cliff Notes.   In any event, this is what I learned:

  1. Based on his review of historical records going back hundreds of years in 30 countries, Piketty has concluded that income inequality almost always gets worse because, “Since the rate of return on capital is naturally greater than the rate of growth in the economy as a whole, people who get most of their wealth from investments inevitably grow richer compared with those who get their money from economy and wages.” The only exceptions are war or direct governmental intervention. That makes sense.
  2. Reform in the tax code must do more than tinker with progressivity; rather, it must consider wealth as a whole, such as real property and intangible assets. Warren Buffet’s tax rate should not be less than his secretary’s. That makes sense.
  3. Other measures to reduce inequality include boosting access to education, increasing capital-gains taxes, and closing corporate tax loopholes. That makes sense.

The book is 685-pages long; I wonder if it will be as enjoyable as the Time article.

April 9, 2014

Gender pay gap

Filed under: Economics,Issues,Law/justice,Politics — Mike Kueber @ 11:56 pm
Tags:

The issue of the week in D.C. seems to be the gender-pay gap. President Obama and the Democratic Party are up in arms because women earn only 77 cents for every dollar a man makes.  As reported by the Washington Post, President Obama expressed outrage over this inequity while loudly trumpeting two amazingly feeble actions:

  • President Obama will take two executive actions Tuesday aimed at narrowing the wage gap between men and women, forcing federal contractors to let their workers discuss their earnings with one another and to disclose more information about what their employees earn.”

I always assumed that gender pay inequity meant that women made less even though they had a similar job with similar education and experience. But today I read an article by my favorite analyst, Nate Silver, examining the relationship between a state’s gender pay equity and that state’s political philosophy (pro-Obama vs. pro-Romney), and he did his analysis merely by aggregating men and women, without regard to job, education or experience.  In fact, he even suggested that those differences might cause the gap:

  • “The gender pay gap has been the subject of hundreds of academic studies. These studies seek to sort out how much of it has to do with overt or implicit discrimination against women, as opposed to labor force characteristics that are not well accounted for by aggregate statistics. For example, the gender pay gap is narrower when measured by hourly rather than annual wages; that’s because women tend to work fewer hours than men. Men also tend to be concentrated in higher-paying industries. They may have more educational and work experience, and they may have higher-ranking positions within their organizations.”

Based on this caveat from Silver, I commented to a liberal friend on Facebook:

  • I didn’t realize the gender pay gap is based on aggregate numbers. All this time, I thought they were comparing men and women in the same jobs with similar education and experience. Is the Democratic Party suggesting that women should earn as much as men even if men are more experienced and better educated and have a better job?”

My friend suggested that, although Silver used aggregate numbers, perhaps other public-policy researchers tried to compare apples to apples, not apples to oranges. To confirm this, I simply returned to the WaPo article:

  • Obama and his aides often say that women earn 77 cents for every dollar men earn, which compares the annual earnings of women working full-time jobs over the course of a year with the earnings of men working the same amount of time. Some academics argue that the gap between the sexes is smaller if you account for a number of variables, including an employee’s length of time in the workforce, specific occupation and education level. Even the most conservative estimates, however, suggest that women earn 5 to 12 percent less for doing similar jobs as men.”

As usual, WaPo is too generous to the liberal ideology. Wikipedia provides a more balanced description of this issue:

  • The most basic way to look at differences in pay between the genders is to look at the median wages of men and women. However, this comparison is of limited usefulness because men and women exhibit very different characteristics for many of the factors that affect pay. For example, men tend to choose fields with higher average pay, and tend to work more hours per week. Because of these differences in order to determine what effect discrimination has upon the wages of men and women in the workplace the differences in career choices must be accounted for. The raw median wages of men and women are often used in misleading ways to inform public policy, without explaining the reasons behind the gap.
  • A study commissioned by the United States Department of Labor, concluded that “There are observable differences in the attributes of men and women that account for most of the wage gap. Statistical analysis that includes those variables has produced results that collectively account for between 65.1 and 76.4 percent of a raw gender wage gap of 20.4 percent, and thereby leave an adjusted gender wage gap that is between 4.8 and 7.1 percent.” The study also concluded that while in principle more of the wage gap could be explained by differences between the groups, the data that would be needed to account for additional factors were not available.
  • While the conclusions of the study commissioned by the United States Department of Labor regarding the adjusted wage gap are generally in agreement with other research, there is disagreement on what factors explain the remaining 5–7%. Some studies assert that the remaining gap is due to discrimination, while some others, such as the Department of Labor study above conclude otherwise. Many researchers also believe that the differences between the choices men and women make are actually a result of discrimination or social pressures, with women being discouraged from high paying fields, and men being discouraged from making choices such as prioritizing job satisfaction over pay.

Summary – despite President Obama’s political grandstanding, which even WaPo seemed to recognize, there is nothing here that requires significant government intervention. Ironically, though, I agree with the Executive Orders.  A couple of years ago, my brother Kelly and I got into a big argument regarding whether employees should share salary information. He is old-fashioned about the subject, but I think this type of information is critical to pay equity, regardless of your sex.

Next Page »