Thursday, April 12, 2012

Good news in Wisconsin

Wisconsin makes it tougher for wage discrimination lawsuits to be filed.  Link here.

Simple thinkers may claim that this is will cause more wage discrimination.  This is highly unlikely.  Anybody who's taken principles of microeconomics and/or lives in the real world knows that there isn't really any gender wage gap or wage gap between races.  At least not in the USA, where markets are relatively competitive.  Theoretically, it's not consistent with the idea that firms maximize profits.  Looking at the evidence, it's simply not happening.

Let's get a quote from this article:

Women earn 77 cents for every dollar that men make. In Wisconsin, it's 75 cents, according to the Wisconsin Alliance for Women’s Health (WAWH), which also estimates that families in the state "lose more than $4,000 per year due to unequal pay."

If you agree with WAWH and think ... "of course women (or insert any group here) are paid less for the same work" then I have a challenge for you.  Go become a millionaire.  It should be easy.  If (insert any group here) are making less - hire only that group.  Your labor costs will be so low that if you can do the other tasks in a remotely similar fashion to other firms, you'll be rich.

Don't bother trying this, however, as these gaps really don't exist as advertised.  There are thousands of firms who would exploit a gender/race/etc. gap if one existed.  The word "exploit" here sounds bad, but that exploitation would increase demand for the supposedly underpaid group.  For example, if women really were paid 80 cents on the dollar for the same work, a profit maximizing firm would hire only women.  That would increase the wages for women, however, while decreasing the wages for men.  Firms that want to maximize profits would exploit this gap until wages were equal.  Why can't firms do this now?  Because there's no wage gap to exploit and people are, in general, paid equally for equal work.

What Wisconsin has done is make it tougher for frivolousness lawsuits to be filed.  This is outstanding!  That will lower costs to firms, these costs will likely be passed along to workers in the form of higher wages.

Way to go Wisconsin.  Politically, maybe this is a bad move as democrats will try to confuse the issue for uneducated voters.  In terms of helping society, however, this is a great step!

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