Kokomo Tribune; Kokomo, Indiana

Business

May 18, 2014

Men and women and mind games when it comes to salaries

Economist Gary Becker died last week. He was a professor at the University of Chicago and winner of the 1992 Nobel Prize in Economics.

Becker was known for his vigorous inquiries into the economics of topics many economists would not touch. He studied marriage and divorce, discrimination, crime and punishment, plus other real world issues previously avoided by the profession. Along with others, notably Armen Alchian of UCLA, Becker’s work became the backbone for the merged study of law and economics.

It was with thoughts of these economists in mind that I was disturbed to read Michael Hicks’ column (April 27, 2004), “Some Truth of Men’s and Women’s Wages,” printed in various newspapers. Hicks, a prolific professor of economics at Ball State University in Muncie, writes about the important issues of our times.

His column opens with this seemingly innocuous sentence: “For the purposes of this column, let us assume that businesses attempt to maximize their profit.” Whenever you hear or read those words, “let us assume,” you want to know what is being left out.

Via assumptions, economists often flatten the terrain with a logical steamroller, leaving the field without a stone of reality. Ignored here are subconscious or explicit preferences of management in hiring, promoting and rewarding employees. By assumption, we enter the fantasy world of perfect competition where only the worker’s contribution to profits counts. How management feels about working with diverse employees is crushed under the weight of an uncompromising pronouncement.

Hicks is quick to mention other factors related to why women earn 77 cents for every dollar earned by men. He specifically calls our attention to occupation, education, job tenure and experience. These four factors, he tells us, “explain almost all wage differences; gender, almost none.”

He discards the possibility of gender’s importance because he already included the four leading employment factors where men and women differ. It is specifically because of gender that we find differences between men and women in occupation, education, job tenure and work experience.

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