12-13-2018 Policy Digest: Gender Wage Gap, Social Security Privatization, Occupational Licensing

There is quite a bit of policy research that has come across my attention in the past few days. The bad news is that I cannot cover it all in the depth that I would like. The good news is that I have covered these topics in the past in some way, shape, or form, which means I can cover these topics more easily. With that being said, let's begin, shall we?

Gender Wage Gap: More Evidence It Is Misleading
Late last month, the Institute for Woman's Research put out some shocking research: the wage gap has been "woefully misstated." Their conclusion is that a woman makes 49¢ for every dollar a man makes. The reason why it looks worse has to do with how they're pulling and manipulating the data. To arrive to this conclusion, the Institute for Woman's Research compared all the earnings of women to all the earnings of men over a fifteen-year period, including part-time and unemployed workers. Unsurprisingly, four out of ten women were out of the workforce for at least a year, which is twice the rate of men being out of the workforce. Beforehand, the gender wage gap figure compared all male full-time workers to all female full-time workers. Including time with no income is naturally going to distort the statistical data to paint the picture that women are very underpaid.

You can see my analysis from February 2018 and April 2013 on the gender wage gap, but my contention has been that not using an apples-to-apples comparison is a manipulation of the data to advance a certain goal. The Institute for Woman's Research is merely the latest attempt to manipulate the data a step further. When you adjust the data for educational attainment, occupational choice, hours worked, and other forms of labor force attachment, the wage gap is all but nonexistent. Fortunately, a study from Harvard University adds to evidence to support my contention (Bolotnyy and Emanuel, 2018). The Harvard study looked at data on bus and train operators from the Massachusetts Bay Train Authority. Since the Authority is unionized, men and women do the same work for the same hourly wages and conditions, and promotions are based on seniority, and yet there was still a wage gap of 89¢. The reason for the gap? Men worked longer hours, and were paid more overtime. Plus, the women took off more time due to childrearing. Much like the study on the wage gap in the ride-sharing earlier this year, it focuses on one market, but it also adds to the increasing preponderance of evidence that the wage gap is not caused by gender discrimination, but by the different choices made by men and women.

Social Security Privatization
I thank former Cato Institute fellow Daniel Mitchell for bringing this one to my attention. The Organization for Economic Development and Cooperation (OECD) released the OECD Pensions Outlook 2018. In it, the OECD stated that "funded, private pensions may be expected to support broader economic growth and accelerate the development of local capital markets by creating a pool of pension savings that must be saved." Many OECD countries have partially or completely privatized its retirement savings (see below), including Australia, Denmark, Sweden, Singapore, the Netherlands, Chile, and Switzerland. I hope that the United States can have the good sense to privatize Social Security one of these days.

Occupational Licensing: Two New Studies
I have written about how occupational licensing creates barriers of entry to many markets, which disproportionately affects the poor. It also increases prices of goods and services since it is an additional cost of labor. How much does occupational licensing cost the economy? A study from the Institute for Justice found that occupational licensing costs the U.S. economy $200 billion annually  (Kleiner and Vorotnikov, 2018). A study from the National Bureau of Economic Research also reduces the equilibrium labor supply by anywhere from 17 to 27 percent (Blair and Chung, 2018).