Even More Alchian & Allen

November 24, 2009

Why not? It’s that kind of week, and like I said, this is probably the best book I’ve ever read on economics.

Wage differences often reflect differences in employees’ abilities and in working conditions, yet such compensating differences in wages are not always welcomed. One of the classic methods of trying to eliminate them is to try to apply the maxim “equal pay for equal work”– on the presumption that equal work is easy to identify and that nonmonetary differences among services by employees or by employers should not count.

The person who has what some people consider to be inferior features dislikes being paid less for the same work, even though the wage difference is what enables the person to offset a personal nonmonetary disadvantage. Popular people complain that compensating wage differences allow those less popular to compete for jobs. Men may be hired because an employer prefers them as workers, but that preference is made more expensive by the excess over the lower wages the employer could have paid for equally valuable work by women. The employer pays more to hire men. Males cleverly advocate equal pay for equal work — of course, at the higher wages paid to men. The effect is to protect men’s employment by reducing the opportunity for women to underbid the men.

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One Response to “Even More Alchian & Allen”

  1. tincolor Says:

    That’s really interesting, I assume that the authors are being facetious about Male’s cleverly advocating equal work, right? So for example: those that advocate equal pay, the women, would actually be advocating something that would hurt their chances at getting work while those opposing equal pay, the men, would be opposing something that would in effect actually help their chances of maintaining a predominance in the workforce. Makes sense. How does that factor in the chance that perhaps the women realize they are doing themselves in but don’t care on principal?


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