What happens when everyone knows how much you earn?
A Boulder, Colorado firm, has voluntarily decided to let workers check a spreadsheet and see what others take home. One employee said she likes it, even when she discovers someone earns more. “I am also grateful to know there’s no back-door deals…” By contrast, paycheck transparency can be tough to handle when someone feels an associate should not earn more. As another employee said, “I have a colleague who’s making a little less than me who comes to me and says ‘I don’t think you deserve to make more than I am making…’”
Through required CEO employee ratio disclosure, the Dodd-Frank Wall Street Reform and Consumer Protection Act takes a step beyond voluntarily sharing salary information to mandatory disclosure. With Dodd-Frank, the SEC is charged with writing rules to insure a pay comparison between CEO compensation and median employee salary. The goal? Transparency could create social pressure to narrow huge gaps between CEO and employee pay.
Thinking of the impact of knowing your “neighbor’s” salary, we can ponder economist Richard Easterlin’s happiness research. Easterlin says that as wealth accumulates, it bestows increasingly less extra satisfaction. Believing that pleasure from wealth is relative, he concludes that as long as you have more than your neighbor, you feel good. Consequently, rich or poor, people just need to have more than someone else to feel good. Here, 2 economists challenge Dr. Easterlin’s conclusions.
Sources: Thanks to Marketplace.org’s “Payday” series. Discussing pay disclosure, their programs here and here were fascinating. To check the current status of the executive employee salary ratio rule, this SEC website has the information. You might also want to look at California’s mandatory pay disclosure rule for public employees. California state workers protested when the Sacramento Bee published salary information from public records.
When North Carolina’s voters rejected same sex marriage, they were not thinking economically.
Traditionally, marriage has been about specialization. With the husband in the labor force and the wife at home, their division of labor resembled a small factory. He supplied the income and she was the “domestic specialist.” As in the factory, specialization led to a more productive household.
Marriage has become a different kind of economic unit. In many households, both partners earn income and both (or none) cook. Washing machines, dishwashers and microwave ovens minimize chores. We have day care and take-out.
With the division of labor changing, so too has the institution. Previously marriage was based on shared production. Now, increasingly, marriage is all about shared consumption. Marriage has become what economists Betsey Stevenson and Justin Wolpers call “hedonic.”
As a result, the demand and supply sides of contemporary marriage markets in which people find partners reflect new values. Correspondingly, the contemporary household as a production unit increasingly is designed for companionship and “consumption complementarity.”
And this returns us to North Carolina and same sex marriage. The new economics of marriage has changed the characteristics of the people who enter marriage markets and of the households they form. Inexorably, new incentives are leading to new choices. As more households change, will politics follow?
University of Pennsylvania economists Betsey Stevenson and Justin Wolpers (who live together and have a child but are not married) explain a lot more about the new economics of marriage here and here and here. If you want to continue further, Ezra Klein’s Washington Post Wonkbook also discusses Stevenson and Wolpers and how their view of marriage relates to the North Carolina vote.
Posted by: adminEcon
Tags: Betsey Stevenson, division of labor, domestic work, economics of marriage, gay marriage, household production units, Justin Wolpers, labor markets, marriage markets, North Carolina, opportunity cost, specialization, traditional marriage
To one group of economists, oral contraception is all about human capital.
1970 appears to have been a turning point. 40 years ago, increasingly, women started entering law school, medical school and other professional programs after college. Instead of majoring in education, more women became judges, physicians, dentists, architects, veterinarians. They entered professions that required years of their time.
As a result, female human capital–a woman’s accumulation of productive knowledge–became more valuable.
Asking why, some economists are saying one reason is oral contraception. The proliferation of birth control pills among unmarried women that started during the early 1970s helped them to time marriage and children. Once women could plan child birth, they could better determine when and how to develop their professional skills-their human capital. They could enter and complete longer educational programs, decide the duration of employment, and have control over professional goals. As a result, women entering labor markets could earn more. Earning more, their value climbed in marriage markets. And, because more women were marrying later, postponing finding a spouse was a less costly decision since, as economists Goldin and Katz express it, marriage markets for older women “thickened.”
Our bottom line: A recent economic study suggests that the pill helped to narrow the gender wage gap, to “upgrade” women’s career choices and to encourage later marriages and child birth. I wonder also whether it materially contributed to U.S. economic growth (but could not find data to confirm it.) Yes, oral contraception is a major social issue but its economic significance is probably considerable.
I started researching the economic impact of oral contraception after reading NY Times financial journalist, Annie Lowrey’s economix blog. That took me to papers by Goldin and Katz from 2002 and a group from the University of Michigan. I also looked at an interesting discussion of “The Efficiency of Gender Equity.”
What does a hair salon “shampoo specialist” have in common with a private detective? In certain states, each needs a license to do business.
But what might licensing involve? For a Texas shampooer, it includes 150 hours of classes while a locksmith in Oklahoma has to pay a fee, take a test, and undergo a background check.
A type of occupational regulation, economists have studied licensing because of its impact on the jobs market. Licensed occupations can have greater prestige, protect consumers, pay higher wages, charge higher prices, preserve the status quo, raise money for the state, and constrain employment growth.
So, should we support it?
More specifically, for each of the following, who should need a license? Acupuncturists? Tattoo artists? Tree-trimmers? Glass installers? Florists? Massage therapists? If yes, requirements?
To make a decision, you might want to read this.
The Economic Lesson
We could say occupational licensing is a market vs. the government issue. Opponents of more licensing say the market would weed out incompetence. Proponents say the consumer needs protection. It could also take us to unemployment. Studies have shown more licensing, less employment growth. Yet another possibility is innovation because licensing tends to preserve the status quo.
During the past 50 years, licensed occupations have multiplied from 5% of U.S. workers to 23%.