Why Are Women Doing So Well in the Labor Market?
By Bryan Caplan
Profit-maximizing employers should be gender-blind, right? Well, not quite. If, given all other information, women are less profitable to employ at a given wage than men, then profit-maximizing employers can’t afford be gender-blind. That’s the great lesson of the theory of statistical discrimination.
So why would women be less profitable to employ? For starters, we need look no further than basic biology: Women can get pregnant, and pregnancy is a burden on employers. If you hire a women of child-bearing age, there is a good chance that you will pay a high price. On top of this, we can add that many men, but few women, remain as focused on their careers after they become parents.
From this standpoint, even I’m surprised that women are doing so well in the labor market. Young single women are actually out-earning young single men in a lot of major cities. You could credit (blame?) discrimination laws. But if these laws successfully forced employers to pay equal wages to unequally profitable workers, you’d expect women to have extra trouble finding a job in the first place. (That’s price controls 101).
Is there another explanation? Perhaps female employees have inobvious advantages that counter-balance their obvious disadvantages. There are many possibilities, but here’s one that seems promising: For employers, a major plus of female employees is that they are easy bargainers. As Babcock and Laschever explain in Women Don’t Ask, women are substantially less likely than men to aggressively negotiate with their employers.
Now Babcock and Laschever take this finding and argue that women should start acting more like men. I see things differently. What Babcock and Laschever have really discovered is a reason why employers should, all else equal, prefer to hire women. No matter what industry you’re in, Entertainment Weekly‘s lesson holds true: “[W]ho wants to work with a troublemaker always looking for a bigger payday?”
Is this one effect big enough to counteract the other drawbacks of female employees? Probably not – which suggests that there are other inobvious benefits of hiring female employees. Anyone got some more candidates? I’d like to hear them. But remember – to solve this puzzle, they have to be financial benefits to employers.