Thursday, August 25, 2016

Gender Pay Gap

Women in America earn 13% less than men. This is the message from Bernie Sander's campaign. He wants to push for equal pay.

I just saw a report that the gender pay gap in the UK is as bad today as it was 20 years ago. Based on the latest survey, women earn 13.9% less than men.

Most researchers attribute this gap to gender discrimination. I disagree.

I attribute the gender pay gap to government policy. In most countries, the government mandated that employers should pay for the cost of maternity leave and, in some cases, health care for the female employees when babies arrive. The cost of the benefits is high for the employer. They adjust for this hidden cost by reducing the wages.

The gender pay gap is caused by market forces. As most employers adjust for the hidden cost, the female employees find have to accept the best offer available to them. Over time, this is reflected in the gender pay gap.

If the government is really serious about pay equality for females, they have to remove the cost of child bearing from the employer. The cost has to be paid by the state and financed through a payroll tax. The employer can provide the benefit and receive reimbursement from the state through an insurance pool.

In my view, this change of policy will help to improve the national birth rate. Many countries are struggling with this challenge.

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