Contributor Post Created with Sketch. False Claims for Gender Equality

 

The number of female CEOs leading Fortune 500 companies has dropped from 32 in 2017 to 24 in 2018. That 25 percent decline has spurred deep consternation among feminists and liberals. Writing about the New York Times’ New Rules Summit, a conference about women in leadership, journalists Rebecca Blumenstein and Jessica Bennett concluded: “For women, the climb to the top has sputtered.” Feminists claim that this decline has ominous consequences not only for the cause of gender equality, but also for the overall level of growth in the economy. Indeed, the McKinsey Global Institute’s (MGI) influential 2015 study, “The Power of Parity,” makes the astonishing claim that the achievement of gender equality in the workforce may “add $12 trillion to global wealth” by the year 2025, which for the United States translates into a 26 percent increase in gross domestic product by that year.

Studies like the MGI’s have fueled the recent passage of a California law that requires publicly traded corporations headquartered within the state to include a minimum number of women on their boards or face substantial financial penalties. California Governor Jerry Brown signed the law with a defiant message. He cited the 1886 Supreme Court case, Santa Clara County v. Southern Pacific Railroad, which held that corporations should be treated as persons entitled to protection against the deprivation of property without due process of law. “Given all the special privileges that corporations have enjoyed for so long,” Brown said, “it’s high time corporate boards include the people who constitute more than half the ‘persons’ in America.”

Put aside his failure to understand that the protection of corporate wealth from government confiscation helped fuel enormous economic growth in the nineteenth century for men and women alike. Put aside, as well, the many legal grounds alluded to by Governor Brown which may yet render this legislation inoperative. Instead, focus on the simple fact that the regulatory push toward gender equality has, paradoxically, huge political momentum but relatively little economic payoff. The usual all-purpose explanation for the male/female pay gap is pervasive gender discrimination by American businesses, notwithstanding their explicit and unwavering commitments to gender equity. It is best to look for other explanations that might account for the gap between the rhetoric and the reality.

We can start by understanding the impact of regulation on labor markets. Here the cardinal principle is that it is highly unwise for the state to place legal barriers, whether by way of tax or regulation, that bar the entry of anyone into any occupation. Thus when the U.S. legal system subjected women to penalties or limitations not applicable to men, the results were egregious. The worst instance occurred when in 1873 the Supreme Court upheld a statute that barred women from the practice of law in Bradwell v. Illinois. In 1908, the Muller v. Oregon decision allowed states to adopt female-only minimum wage laws to “protect” women from the hazards of certain employments, resulting in the widespread loss of jobs for women thereafter. No feminist defends these explicit sex-based rules today.

The removal of any and all barriers to entry makes perfectly good sense. But the modern gender equality movement wants to go further to sweep away less visible and more subtle obstacles to the advancement of women in the workplace. And how is this to be done in the United States? Grand claims like those made by the MGI presuppose that there are millions of profit-making firms who are overlooking a huge pool of female talent in a wide range of occupations. That claim is inherently suspect because it assumes that experts operating at a distance have better knowledge of what a particular firm needs than the firm’s directors, officers, and managers who are charged with its overall well-being. Perhaps certain key figures (male or female) are so obtuse that they miss these evident opportunities for gain. But it is wildly improbable that virtually all of these businesses suffer from the same incurable blindness, even as they champion the very policies they fail to implement.

Yet if such a lost opportunity exists, no existing competitors nor new entrants have come in to pick up the supposed slack. There is little doubt that there has been a huge transformation in the levels of participation of women in the workplace—virtually all of it attributable to market forces. Positing some set of unconscious barriers makes it hard to explain why and how these major changes took place. It is better, therefore, to cast a critical eye on the supply side. The ideal of gender equality would be far easier to implement if job applicants for all positions were equally proportioned by sex. But that ideal is effectively stymied by a few stubborn facts. Specifically, the percentage of male and female candidates varies radically by field: at present more social workers are female, more engineers are men. These decisions reflect some combination of differential interests, aptitudes, and skills, and it is highly improbable that all these differences should be regarded as the results of vestigial forms of discrimination.

Take engineering. Overall the percentage of women in undergraduate engineering programs is about 20 percent. The distribution within that group is skewed, ranging from a low of 10.9 percent in computers to a high of 49.7 percent in environmental engineering. Discrimination does not look like a plausible explanation for these differences within the same general field. Socialization surely has some impact, but parents have little reason to direct their children away from the most promising fields, and individual preferences should not be overridden in the name of some social cause. All sorts of traits matter, and it is surely not irrelevant that women on average tend to do less well in various quantitative tasks when measured by standardized tests than men on average, even if at younger ages girls often outperform boys at these same tasks. Indeed, it is at the highest levels of abstraction that the sex differences loom largest.

Understanding these differences explains why there are gains from specialization in fields by men and women. Any effort, therefore, to impose a numerical equality by sex in any occupation will only retard the growth that deregulation would spur. The MGI’s extravagant claim that gender equality will fuel huge GDP growth in the United States is theoretically and empirically indefensible. Any state interference with voluntary markets, whether by requiring quotas or paid family leave, will slow down economic growth for everyone concerned. Thus Brown’s California statute mandates that by 2021 all corporations within the state with five board members have at least two women, and all corporate boards with six or more members have at least three. If a board with two women grows from five to six, the next member must be a woman.

One rationale for these onerous requirements is that, according to state senator Hannah-Beth Jackson, women are more collaborative than men, so their appearance on boards will make these companies more successful. Other studies insist that boards with higher diversity yield greater profits. But if true, why have firms opposed the law? One explanation is that the hundreds or thousands of women needed to fill those seats may be of lower quality than those already appointed. A second is that industry specialization matters. In technical fields, parity could be very hard to achieve. More to the point, there is no reason to think the relevant talent pool divides fifty-fifty. Brown thinks that the number of women on corporate boards should mirror the number of women in the general population. But his baseline is meaningless, because what matters is the number of individuals that have the requisite skills and willingness to do the work required of board members. Given that women often make different lifestyle choices than men, the available talent pools are not likely to be equal, especially in technical fields. There is already enormous social pressure to add women to these boards. There is no reason to pile on with this unneeded mandate.

The first lesson in regulatory policy is to know what you, the regulator, do not know. The second is that people respond to incentives. Any effort to dictate business outcomes will have negative unintended consequences—including the decision of new corporations not to incorporate or place their headquarters in California, the reduction of minorities on boards, and putting the same women on too many boards, perhaps at salaries artificially higher than those of their male peers. And the third lesson is that any effort to impose “pattern outcomes” on firms will always produce disastrous social outcomes. The MGI proposal does not have a chance of raising GDP at all, let alone by 26 percent. The only method for securing that result is through reduced taxation and deregulation, which right now has led unemployment rates to hit new lows for every group of Americans, whether by sex, race, or age. That’s a path to better outcomes for women and men alike.

© 2018 by the Board of Trustees of Leland Stanford Junior University

There are 13 comments.

  1. CarolJoy, Above Top Secret Coolidge

    Way back in the early 1990’s, there was a La Raza woman activist stating that since thirty percent of the people in California were Latino, then thirty percent of all PhD’s should be given to Latinos.

    She overlooked the important consideration that at that point in time, half of that 30% of the population was under the age of 15.

    When I heard her talking about the issue, I fully envisioned hundreds of diaper clad infants offered up PhD’s.

    The fact that the public has accepted “equal rights” as a substitute expression for Civil Rights is probably where we all went wrong.

    For instance, when circa 2005,actress Geena Davis was out promoting her TV show “Commander in Chief,” she began espousing her beliefs about equal rights. (Her show lasted only one season.)

    She made a statement to the effect that ability is irrelevant – that equal rights demand that women be in half the positions in our society. Including the highest political offices. All of this for the good of us women, because equal rights are important. (At no point did she use the term “civil rights.”)

    I have no idea when this philosophy started, but the term “equal rights” needs to be snuffed out.

    • #1
    • October 9, 2018, at 3:13 PM PDT
    • 2 likes
  2. Ray Gunner Coolidge

    Gender parity in corporate boardrooms, huh? I wonder where Moonbeam is on a law requiring a 50% female participation in the roofing, commercial fishing, and logging industries? Theories, anyone? 

    • #2
    • October 9, 2018, at 3:41 PM PDT
    • 4 likes
  3. James Gawron Thatcher
    James Gawron Joined in the first year of Ricochet Ricochet Charter Member

    Richard Epstein: The first lesson in regulatory policy is to know what you, the regulator, do not know. The second is that people respond to incentives. Any effort to dictate business outcomes will have negative unintended consequences—including the decision of new corporations not to incorporate or place their headquarters in California, the reduction of minorities on boards, and putting the same women on too many boards, perhaps at salaries artificially higher than those of their male peers. And the third lesson is that any effort to impose “pattern outcomes” on firms will always produce disastrous social outcomes.

    Richard,

    Your solid reasoning is being trumped by emotional falsehoods. We are learning that you must fight back. Trump is a counter-puncher we all underestimated the importance of this. The whole party just realized they had to defend Kavanaugh. In Academia, there is finally push back too. Jordan Peterson wouldn’t be bullied by his University administration or the Canadian Government. Now we are starting to see some others come forward and hit back. Peterson doesn’t do ideology he does logic and science. Here is another example of somebody that is in his league.

    Regards,

    Jim

    • #3
    • October 9, 2018, at 5:29 PM PDT
    • 3 likes
  4. James Gawron Thatcher
    James Gawron Joined in the first year of Ricochet Ricochet Charter Member

    Richard,

    I like Fiamengo’s basic logic/factual approach. Here is her background info on Christine Blasey Ford. Very interesting.

    Regards,

    Jim

    • #4
    • October 9, 2018, at 5:41 PM PDT
    • 5 likes
  5. DonG (skeptic) Coolidge

    The primary purpose of board members is to provide connections. Good choices are bankers, CEOs of other companies, former political leaders,… Women with great connections will be very busy sitting on lots of boards.

    The problem for Leftists is that there are an infinite number of genders and the law will need to be expanded to require an infinite number of board members. This will not end well, but virtue was signaled!

    • #5
    • October 9, 2018, at 6:43 PM PDT
    • 1 like
  6. The Reticulator Member

    Richard Epstein: Indeed, the McKinsey Global Institute’s (MGI) influential 2015 study, “The Power of Parity,” makes the astonishing claim that the achievement of gender equality in the workforce may “add $12 trillion to global wealth” by the year 2025, which for the United States translates into a 26 percent increase in gross domestic product by that year.

    If U.S. companies are passing up that kind of loot, it makes one wonder whatever happened to corporate greed.

    Yes, I know corporate greed is alive and well when it comes to government corporations. But what happened to private corporations?

    I suppose there is also the possibility that the above claim is false. 

    • #6
    • October 9, 2018, at 10:05 PM PDT
    • 1 like
  7. Larry3435 Member

    When my wife and I fled California three years ago we did so because it was clear that the state was committing suicide. I went through a grieving period because I had spent my entire life (almost) in the Golden State, and I had loved the place for many decades. But now my grieving period is over, and I take positive delight at each new nail that is driven into California’s coffin. 

    If Moonbeam’s new idea is to put burdensome (or even impossible) demands on companies headquartered in the state, the inevitable result will be to drive even more companies out of the state. That trend just keeps accelerating, and I am glad to see it. Perhaps, after the total collapse and the civil war, sane people will be able to reclaim the state and return it to its former glory.

    • #7
    • October 10, 2018, at 4:53 AM PDT
    • 1 like
  8. Stad Thatcher

    Richard Epstein: Brown thinks that the number of women on corporate boards should mirror the number of women in the general population.

    The same goes with race. I’m waiting for an NBA which is 77% white . . .

    • #8
    • October 10, 2018, at 5:58 AM PDT
    • Like
  9. PHCheese Member

    I have a liberal friend who has twin grand daughters. One studied computer science and the other gender studies. The first got immediately hired by Amazon. My friend is furious and shocked that the other is still waiting tables two years after graduation. Go figure.

    • #9
    • October 10, 2018, at 9:08 AM PDT
    • Like
  10. CarolJoy, Above Top Secret Coolidge

    Ray Gunner (View Comment):

    Gender parity in corporate boardrooms, huh? I wonder where Moonbeam is on a law requiring a 50% female participation in the roofing, commercial fishing, and logging industries? Theories, anyone?

    I kept thinking maybe Moonbeam would resign and let a woman take his place, to show how sincere he is about this gender equality stuff.

    Of course, that would only bring forward someone like Kamela Harris, so I doubt it would mean an improvement.

    • #10
    • October 10, 2018, at 10:31 AM PDT
    • 1 like
  11. CarolJoy, Above Top Secret Coolidge

    Stad (View Comment):

    Richard Epstein: Brown thinks that the number of women on corporate boards should mirror the number of women in the general population.

    The same goes with race. I’m waiting for an NBA which is 77% white . . .

    It is called lacrosse. (NLA)

    • #11
    • October 10, 2018, at 10:31 AM PDT
    • Like
  12. Ray Gunner Coolidge

    CarolJoy (View Comment):

    Ray Gunner (View Comment):

    Gender parity in corporate boardrooms, huh? I wonder where Moonbeam is on a law requiring a 50% female participation in the roofing, commercial fishing, and logging industries? Theories, anyone?

    I kept thinking maybe Moonbeam would resign and let a woman take his place, to show how sincere he is about this gender equality stuff.

    Of course, that would only bring forward someone like Kamela Harris, so I doubt it would mean an improvement.

    Not necessary. Moonbeam can simply “identify” as female in even years, and male in odd years. And since gender is entirely a social construct anyway, male board members in California can take turns “identifying” as female on their annual Corporate Disclosure Statements every year.

    • #12
    • October 10, 2018, at 11:59 AM PDT
    • 1 like
  13. James Gawron Thatcher
    James Gawron Joined in the first year of Ricochet Ricochet Charter Member

    Ray Gunner (View Comment):
    Not necessary. Moonbeam can simply “identify” as female in even years, and male in odd years. And since gender is entirely a social construct anyway, male board members in California can take turns “identifying” as female on their annual Corporate Disclosure Statements every year.

    Ray,

    Brilliant! This solves the problem. When you have no concern for either reality or logic, one can be so innovative.

    Regards,

    Jim

    • #13
    • October 10, 2018, at 2:10 PM PDT
    • 1 like