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Milton Friedman had it right, cut equal pay legislation

Salim Ali

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Equal pay for equal work is a policy that sounds fair and reasonable on the surface. I agree with the principle that men and women of all races should be paid the same wages for the same labor.
This pay should be equal to the value that the employers place on their labor.
Racism and sexism have no place in business. But there is a problem with such policies: that they could potentially have the opposite intended effect no matter how noble the intentions might be.
Milton Friedman, an economist, made a very reasonable argument against equal pay legislation.
He argued that if you look at employers who hire men over women they have their reasons.
These reasons might stem from sexist tendencies, or they may not.
But if the offended group offers to receive less in wages to do the same labor, then now the employer bears a cost for this discrimination which is the difference between what he would pay the man versus the woman.
The woman has a trump card to fight against discrimination which is that she can offer to work for less.
No matter how sexist and chauvinistic the employer might be, he will be forced to recalculate whether his outdated beliefs are worth the cost.
Now add equal pay for equal work legislation into the scenario. Now the woman has lost her trump card because the employer is forced to pay the same wage.
Now his sexism does not cost him anything and he is free to employ men over women without bearing the cost he would have absent the legislation.
So is it fair or right that women should willingly offer to be paid less and just accept it? No, but the ability to individually negotiate with employers is the best weapon anyone has against discrimination.
For this reason I agree with Milton Friedman, and that is what I would offer as the most effective solution, of all possible solutions, to this problem of discrimination against anyone no matter the race or gender.
I would also point out that people have a hard time ignoring the good intentions of policies in favor of looking at their actual effects.
To hear Friedman’s argument for yourself, go to Youtube.com and type “Milton Friedman equal pay for equal work.”

Comments, questions, inquiries or rebuttals to this opinion can be sent to salim.y.ali@mercercluster.com

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No Responses to “Milton Friedman had it right, cut equal pay legislation”

  1. Lopez on April 25th, 2012 8:28 pm

    With out the law…
    If I am a sexist, then i won’t hire women unless i can negotiate a lower wage with them. -If i can negotiate a lower wage with women than I win because I pay less for the same work.
    -If i can’t negotiate with them than i hire men because that’s my preference so i also win.

    If i’m not a sexist I pay a man or a woman the same wage but do not get the chance of hiring someone at a discounted wage for the same work like the sexist. That’s a lose if i’m a profit maximizing businessman.

    Seems like it pays to be sexist. I don’t see a trump card.

    With the Law…

    Woman doesn’t gets hired because of a sexist employer. She then sues for this injustice and makes bank. $$$

  2. Sean Kennedy on April 25th, 2012 10:36 pm

    This is a legitimate theoretical proposal, however, is there any quantitative evidence supporting it? 

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Milton Friedman had it right, cut equal pay legislation