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Equal Work for Equal Pay Does No Good

28 April 2012, 20:26

Another economic fallacy that is often trumpeted on behalf of the workers is ‘equal work for equal pay’. Like many campaigns, it looks good on paper, but in fact has the direct opposite effect of what it intends. Instead of promoting ‘diversity’ and ‘equality’ in the workforce, it hinders it. To overcome this inherent stumbling block, it in effect leads directly to quota systems and affirmative action, along with all the inefficiencies and accusations of ‘window dressing’ that accompany it.

When workers and employers negotiate the terms of employment, the only advantages that a perspective employee has are firstly, the skill set and experience they have acquired before the interview, and secondly the ability to offer to work at a lower wage than their competition. Workers are selling a service; their labor power. Only a higher quality of service or a cheaper price can entice prospective employers. For example, if you go to a used car dealer and see two luxury cars for sale for the same price, but one of them has an old tire, a scratch on the bonnet and an extra 5000km on the clock. The dealer can offer the slightly damaged car at a lower price to entice you to buy it instead of car in a better condition. In a free labor market, less than perfect employees can also do the same to entice employers to give them a job, or buy the service they are offering. Equal work for equal pay blocks this most basic of transactions in a free market system.

The follow on effect from this is that it hinders less able people from bargaining for a job. Think in terms of migrant workers coming to South Africa. They earn good money by their home countries’ standards even though they are paid less – they have bargaining power to offer to work at a lower wage. Imagine passing a law that required foreigners to be paid the same amount as South Africans. Sounds good on paper, but it would actually harm the foreign labor market because it reduces, to zero, the economic benefits of hiring foreigners. This means that if someone is discriminatory against foreigners, they have absolutely no incentive to hire them, since they will pay the same amount, regardless. Only highly skilled foreigners could hold on to their jobs, whilst the unskilled and the poorest of the poor will have whatever little competition they had against South African workers negated.

Let’s look at this in terms of race. If there is a racist employer that only likes to employ white people, a black person comes for an interview and is immediately turned away. The black person pleads with him, even overs to work at three quarters of the salary that this racist is paying white people. If the racist refuses, he is in effect paying for his discrimination in real terms. Now say the racist values economics more than his warped principles and gives the man a job at a reduced wage. Along comes the black labor union and screams and shouts about how blacks are paid less by this racist. They pressgang the government into an equal work for equal pay labor regime. What happens when the black employee is up for evaluation? He is fired on some spurious accusation because the racist no longer has any incentive to keep blacks around. Again, equal work for equal pay has undermined diversity in the labor force and has, in effect reduced the economic cost of arbitrary discrimination to zero.

Now we come to the crux of the matter. ‘Aha!’ The labor unions say, ‘The government must institute a quota law!’ This is only logical, since in the absence of economic incentives to employ minorities (or previously disadvantaged majorities) there have to be legal repercussions to punish these racists that don’t hire eighty percent of this race, or fifteen percent of that race. Now between the quota system and the principle of equal pay, skills and experience along with individual circumstances have been removed from the equation. A politician and labor union leader sitting in some office, far away, have extended their hands into the interview room. The arrangement only benefits a certain type of worker, namely the skilled members of the target race of these policies.

Equal work for equal pay and affirmative action, despite popular belief, do nothing at all for a poor, unskilled black worker with a school leaver’s certificate. When equal pay for equal work is enforced, only those with experience and skills can get jobs. Those without appropriate experience are consigned to work in unskilled positions, with no bargaining power to move past the ‘glass ceiling’ of the poverty trap set by the very policies that claim to help them. Apartheid itself was built on the equal pay for equal work mantra, demanded by the white labor unions; because neither economic nor political incentives alone would have been enough to permanently choke eighty percent of the majority out of the labor force, should they be allowed to bargain with their employers to work for lower wages.

Lower wages for blacks occurred precisely because of legal interference and quota systems. Bantu education robbed them of skills, and minimum wages/equal work for equal pay robbed them of the opportunity to gain employment by working for less. The cumulative effect of this locked them into unskilled and semi-skilled positions; people that were just as, if not more so, capable of doing a so-called ‘white man’s job’. This was especially true of the parastatal companies and civil service companies padded by inefficient, poor Afrikaner labor employed solely for ideological reasons. Apartheid was unsustainable because it cost South Africa millions to go against well- established trends in economics by supporting racist policies aided and abetted by flawed, socialist economics.

It is a shame to see that our current ANC government is falling into the same traps. Guided by the black labor unions such as COSATU, the continuum of South African labor practices is one that condemns people to a certain ‘place’ in the pecking order in our economy. This illogical clinging to ideas that wages or prices can be set by a handful of people in offices in Pretoria is going to perpetuate Apartheid’s inequalities – not remedy them.

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