Thursday, October 25, 2012

The female wage gap myth

By Dean Kalahar

We constantly hear that discrimination and exploitation force women to make 77 cents for every dollar a man makes. It’s time to end the wage gap myth with a dose of common sense economics.

First of all, the wage gap is based on inappropriate use of data and statistical analysis. In the U.S. the 77 % number is calculated by looking at the median yearly earnings of women to men. The median is defined as the middle value of all the wages in a given sample. Using the median is useful if we are comparing winter temperatures between New York and Tampa, where one dimensional data has validity, but applying it to humans that have free will and biological differences proves nothing except that demagoguery works.

Is the median wage lower for women, absolutely, but the statistic is not an apples to apples, job for job comparison and thus has nothing to do with “paying women less than a man for doing the same job.” Using the median without taking into consideration specifics of individuals in the workplace is intentionally misleading or ignorant.

So what causes the variation in pay? Personal and workplace choices account for much of the gap. Labor Department research shows that men choose more dangerous and high stress jobs. Men choose higher paying career fields. And men hold more full time jobs, and work longer hours, weekends, and nights than women. All these factors lead to higher wages regardless of gender.

Stanford economist Thomas Sowell shows that “women are typically not educated as often in such highly paid fields as mathematics, science, and engineering, nor attracted to physically taxing and well paid fields as construction work, lumberjacking, coal mining and the like.” All these factors create differences in pay that have nothing to do with the exploitation of women.

Maybe the biggest reason is biology. Women make up 50% of the workforce but give birth to 100% of the babies. And if women choose to have children, their incentives change and this affects their choices of jobs, careers, continual service and hours spent on the job. The New York Times reported that among Yale alumni in their forties, ―only 56 percent of the women still worked, compared with 90% of the men. It goes without saying that traditionally men do not face the same incentives of biology and child rearing as women.

When these variables are included to the unadjusted 23 cent wage gap difference, the gap falls to 5-7 cents; according to a 2010 study by The United States Congress Joint Economic Committee’s Comprehensive Review of Women in the US Economy. Thomas Sowell concurs showing that “Women who remain single earn 91 percent of the income of men who remain single, in the age bracket from 25 to 64 years old.” And what’s left of the 5% gap is bridged by systemic socio-cultural factors, not by intentional causation based on discrimination.

If we actually compare apples to apples in the workforce, the facts will disturb those who are married to the vision of women victimization.  According to Marty Nemko and data compiled from the Census Bureau, unmarried women who've never had a child actually earn more than unmarried men. In a 2010 study of single childless urban workers between the ages of 22 and 30, Reach Advisors found that women earned an average of 8% more than their male counterparts. And according to the Labor Department, “of men and women who work 30 to 34 hours a week, women make more, 109 percent of men’s earnings.”

Sowell backs up these findings “comparing never-married women and men who are past the child-bearing years and who both work full-time in the twenty-first century shows women of this description earning more than men of the same description.”

Basic economics tells us that it makes no sense for an employer to pay a man more than a woman, if they can get the same productivity out of hiring the woman; unless the employer likes discrimination more than they like profit. To believe that women are paid 75 percent of what men receive for doing the same work is to believe employers can afford to pay 3 male workers the same as they pay 4 female workers that would produce 25 percent more output, and stay competitive in a economy that sees most businesses last less than ten years.

Even prior to all the hand wringing about pay inequality, free markets proved there was no pay discrimination. Sowell’s research shows that single women in 1971 who had worked continuously since high school earning slightly more than men of the same description. This fact was conveniently missed in 1972 when an executive order was signed creating affirmative action for women who were being underrepresented in the workplace.

The facts just don’t add up in the wage gap argument. To say that men are paid more than women for the same job is an attempt to redefine the laws of supply, demand, profit motive, and human nature. Class, gender, and racial victimhood pay big dividends for politicians, but only if gullible, ill-informed citizens buy false rhetoric like the female wage gap. 

Monday, October 8, 2012

Thanks Ben for the stagflation.

Why do we have stagflation? Because the FED views money as simply a numerical unit to be manipulated, not a representation of productive wealth creation and economic efficiency.

Excerpts and edits of a piece by Jeffery Snyder writing about: Central Banks Gone Wild: Money Is Now a Total Fiction

For all intents and purposes, global central banks view "money" as nothing more than "charta", a Latin word for "token"… 
Chartalism in this form is nothing more than a theory that capital can easily be replaced by mere monetary units, as if there is no information content relevant to economic efficiency stored in the flow of capitalized money. Past success in the form of stored "earnings" or "money" is, following this line of inquiry, eminently replaceable by determined government planning. In that way, money is now flowed or channeled on the basis of poor past performance rather than on the basis of good expected future performance. 
Fresh capital in the modern monetary sense is a unit on an accounting statement, devoid of any larger connotation. For investors and the process of investing, however, accounting should have meaning - where a business gets its money matters greatly in the process of investment analysis.
This philosophy thoroughly upends capitalism…

The entire premise of capitalism is the efficient deployment of capital; capital having full meaning absent in the sense of modern money. Capitalists create capital through successful deployment of "money", turning that "money" into true wealth of productive enterprise. That successful deployment of money creates additional capital that can be "monetized" in asset markets, but the number of new monetary units has no basis in trying to predict or determine successful business acumen. That is the traditional role of intermediation. 
In the past four years, central banks have attempted to resurrect economic health by adding new charta to the system with perfect exclusivity biased to institutions and businesses that have destroyed their past stores of capital, despite the very visible fact that said destruction of capital is the quintessential measure of real economy inefficiency.

If the destruction of money has meaning, then so does the creation of money, or at least the methodology of determining how money is acquired. Bernanke's theory, shared by all the major central banks on this globe, is that economies can only recover when capital is disadvantaged in favor of meaningless money. 
The primacy of meaningless money is such that the entire system of savers, the majority of which have created actual capital and acquired value, need to be hamstrung by (zero interest rate policy) ZIRP in favor of institutions that destroyed real capital in the inefficient pursuit of the very policies that central banks directed in the first place. Success is to be shunned and disfavored in the socialized and institutionalized process of debt creation from the very firms that have proven beyond a doubt that they are not capable of maintaining economic efficiency. The ascendancy of chartalism is the only manner in which such a backward system could actually exist. 
Unfortunately, real economies run not on meaningless money, but on sustainable and efficient success. All of these banks and central banks need to emulate the ideals cleverly conjured and portrayed in the Smith Barney TV commercials of decades past, when firms used to "earn" their money. The capital on a bank's balance sheet at one time (before fiat money and transcontinental wholesale money markets) denoted success at intermediating the pool of savings, turning past success into additional future success in a virtuous circle that is the hallmark of every thriving economy in history. In short, money is supposed to be about winners and losers. Economies need to reward the virtue of economic winners and delete the societal and systemic cost of the losers. 
Without monetary meaning, there is no sorting process of winners and losers; there are only losers that are supposed to take comfort in the vacuous experimentations of academic central bankers that passes for progress and evolution. 
More than anything, human nature needs value and meaning in money. Maybe central bankers should try their hands at investing without any meaning to money and capital - it doesn't work. Try as they might, particularly with reducing economic agents to mathematical equations and models, modern mainstream economics has tried to dehumanize the economic and financial system. It certainly makes economics appear more scientific, but ultimately that is just the cloak of self-delusion - models are not science. 
Perhaps central banks have re-invented an achievable means to a healthy economy with meaningless, inhuman tokens, but the results of the past four years, particularly 2011 and so far in 2012, are rather conclusive and unambiguous doubts. It's easy to blame fiscal profligacy for all the current ills, but such bad habits were borne and nurtured by money without any real meaning in the first place - intermediation removed from its eponymous task.

The word debasement itself is not just a semantic accident; it literally means to reduce status or esteem - very human concepts. Welcome to the world where capital, in a still nominally capitalist system, is as pliable and fictionable as TV advertising.

Wednesday, October 3, 2012

The dollar is just paper

Understanding destructive monetary/fiscal policies(increasing the supply of dollars without a proportional increase in productivity/GDP growth)

Or how the FED and Obama administration have devalued the dollar causing inflation now with hyperinflation to come.

What is it about fiat currency debauchery that makes it so hard to understand? Imagine the mockery Michelle Obama would get if she announced plans to cure the country's obesity epidemic by changing the number of ounces in a pound. Wow, I'm down to 175 without dieting! Yet this is exactly what is happening to the dollar, with much worse to come.
 -Bill Freeza

The value of the dollar, in other words, has collapsed to less than half of the number ounces of gold it was worth when President Obama acceded to the presidency and to less than a sixth of what its value on the day, say, George W. Bush acceded. -Editorial, New York Sun