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An Excerpt: The New Wealth of Nations, Surjit S. Bhalla

Surjit S. Bhalla

In his latest book Surjit S Bhalla argues that Education is the new wealth and it is distributed more equally. In one of the chapters titled “The Future is Women: Women and Transformation,” he argues women have equaled and are now exceeding, the educational attainment of men. An excerpt from the chapter:

Women and discrimination

There is more than a lively debate about equal wages for equal work and equal ability. And if the wages are not equal, then we have a convincing display of the muscle power of irrational men. Note what happens when there is discrimination in the marketplace. The owner, in this case the male, will be losing profits if he decides to discriminate (whether the discrimination is on the basis of sex, or race, or nationality is irrelevant).

There are two examples of how discrimination39  takes place, and it is important to distinguish between the two. One example of discrimination in the marketplace is that I decide not to hire a woman at all, and instead, that job is occupied by a male, at presumably a higher wage than the female. This is an irrational and costly decision by all means.

Now let us consider the alternative. I am super-rational, and I hire a woman who is just as productive as a man, but I pay her lower wages. In this instance, I end up making extra profits, and the woman gets paid less than is her due. This is the reason behind many arguing for equal pay for equal work.

What one finds, in the case of the US, is that the average wages of women are only three-fourths the average wages of men.

But can the latter instance happen for a large number of women, and on a sustainable basis? If all employers only hire women at a lower wage, then they have to be explicitly, or implicitly, colluding. Is that happening? This seems unlikely, but one should look at the evidence. What one finds, in the case of the US, is that the average wages of women are only three-fourths the average wages of men. That is the situation at present; in 1980, however, that ratio was less than 60 per cent.

Considerable evidence exists that women today have an edge over men in terms of educational attainment. Obtaining only 75 per cent for similar, or higher, educational levels is a definite sign of discrimination. This ‘fact’ also shows that the most capitalist of economies, the US, is composed of very rational employers who are clearly colluding to make profits off the backs of women.

Fortunately, this ‘fact’ is plain fiction. Several scholars (and a large number of female economists) have documented that discrimination against women is not an empirical reality in the US, circa 2000. Writing in the economics journal American Economic Review in May 2003, June O’Neill concludes that a substantial portion of the wage gap of 25 percentage points (the difference between the $100 the average male employee gets and the $75 the average female employee is able to garner) is due to work experience and occupational choice. She also argues that women have less work experience because they withdraw from the labour force to bear and look after children; and they are dominantly in occupations where the wage is lower, for both men and women. When O’Neill factors in these differences, the wage gap is reduced to only 10 per cent. The author also notes that wage differences vary by the level of education; and that the wage gap falls considerably (to near zero) when the examination is restricted to only high school graduates.

The major conclusion from several such studies is the same: there is precious little discrimination in the marketplace. The discrimination that exists, and it does, is outside of the market and inside the home.

As a young undergraduate at Purdue in the mid-1960s, ‘fresh off the boat’ from India, I noticed what appeared to me to be very strange—there were very few professional women in America. Even in India, a poor developing economy with a lot of discrimination against women, female doctors, and lawyers, and teachers were not uncommon and secretarial jobs were occupied mostly by men.

Occupational choice accounts for a large portion of the wage gap between men and women…

In many ways, that casual inference was not incorrect; what research has demonstrated is that occupational choice accounts for a large portion of the wage gap between men and women, and many women were in low-paying occupations in the mid-1960s. Today, increasingly, women are more broadly represented.

Some Scandinavian countries (and others will follow) require parental leave to be shared between both mother and father. This will have the strong implication that differences in job experience will no longer be an important factor in explaining the female–male wage gap.

Indeed, times are changing, perhaps because women are ascending. Governments are changing their policies on leave when children are born; some Scandinavian countries (and others will follow) require parental leave to be shared between both mother and father. This will have the strong implication that differences in job experience will no longer be an important factor in explaining the female–male wage gap.

While on wage gap, and since I’m an avid sports fan, the question of equal pay for female and male cricketers, basketball players, golfers, etc. keeps coming up. Wives, sisters, and daughters are particularly vocal on this score. In one such heated discussion, my daughter herself came up with the following observation: should a male model be paid the same as Gisele Bundchen? She couldn’t quite bring herself to say yes—and neither could I.

In a society such as India, which has historically favoured sons over daughters, parents preferred to send their sons to school; family income was overspent on the young men, possibly to attract higher future income in the form of a dowry.

Far removed from the developed world of the US is the developing economy of India. In 1983, in urban India, for the ages between fifteen and twenty-four, it was observed that young women had two-thirds of the earnings of young men. Many in India, especially women scholars and economists who lean left, attributed this to a discriminating marketplace. On deeper examination, it was observed that the education levels of young women were two- thirds of young men. Once again, the lower female wage had more to do with discrimination at home than with discrimination in the marketplace. In a society such as India, which has historically favoured sons over daughters, parents preferred to send their sons to school; family income was overspent on the young men, possibly to attract higher future income in the form of a dowry.

But even India is changing, and changing fast. A parallel 2011 household survey found that young women and young men in urban India had the same levels of education; and female wages were 3 per cent higher. The ‘market’ stayed the same—what changed was the discriminatory behaviour at home.

Excerpted with permission from The New Wealth of Nations, Surjit S. Bhalla, Simon & Schuster India, MRP 599.

Also Read: ‘It’s not a career for women!’ an Excerpt from Shoot. Dive. Fly

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