The Dismal Science and women in the workplace

There are good reasons why economics is called “the dismal science“, one reflects upon reading The Logic of Life by Tim Harford (The Undercover Economist). It shows us why revolutions are rare, why special interests systematically prevail in politics, and why, rationally speaking, it’s hard to justify expending the energy to go out and cast your vote in an election (“Steve Landsburg goes so far as to suggest that if you want to change politics, you would be better advised to buy a lottery ticket with the intention of spending the proceeds on lobbying.”)

A chapter examines a number of experiments showing how racism emerges in the workplace, even with a level playing field (call two equally endowed groups of people, say, “green” and “purple”) where decisions are subject to tiny random variations, and how in real life company recruiters actually do categorize resumes into three buckets: “white and good”, “white and mediocre”, and “black”. The key here is to distinguish “taste-based discrimination” (which is irrational and self-defeating) from “statistical discrimination”, which Harford chooses to call “rational racism” in order to drive the point that it won’t go away if we don’t do something about it (“doing something”, in econo-speak, typically being about changing the incentive structure for decision-makers).

Yet, Harford misses the opportunity to apply his own findings to women in the workplace. Let’s try.

First of all, through the whole “division of labor and comparative advantage” spiel, he makes it clear that we don’t necessarily need to become much better performers in the office; we’d be better advised to start by becoming a lot less competent at domestic work, something I have already argued for. However, once we’ve rebalanced the housework, we’re still stuck with an inescapable reality. Say that eighty per cent of women, over the course of their working life, take some time out to bear one or more children. The actual bearing of the children is hardly outsourceable (surrogacy is forbidden in many jurisdictions, and adoption has its own costs and requirements on the parent’s time). So, first of all, we’d be well advised to keep maternity leave at a minimum, and to introduce a mandatory matching paternity leave for fathers. But how many men will vote for that? It’s against their interests, since caring for an infant child is notoriously much harder than hanging around the office water cooler.

The reality is that the individual woman will have less opportunities in the workplace regardless of whether she actually bears children or not. That’s exactly what Harford calls “rational discrimination”: and it doesn’t even take a majority of infant-bearing women to make this happen. It would probably happen, say, even if five per cent of women produced all the infants in the world, and ninety-five per cent remained childless. Because, you see, ex ante the employer has no way to tell whether a given woman is going to bear children.

Women fight hard against this structural disadvantage (for example, by getting more years of education). Yet, for the individual career-minded woman, game theory shows that the only way to become as attractive to an employer as her male counterpart would be to signal that she is not going to bear children, and to do so in a credible manner. As Nobel Prize winner Thomas Schelling says, “the ability to make a binding promise is very useful”. Unfortunately, about the only way to make this type of promise binding and therefore credible is to get irreversibly sterilized, and to show the surgeon’s certificate to prospective employers.

Unless you view this as a desirable social outcome, you have to agree on at least one of two solutions. It’s either compulsory paternity leave for new fathers, for at least as long as the mother’s maternity leave (or probably even longer, to compensate for the share of children born in fatherless households); or another way to change the incentive structure, such as quotas for women in congressional and governmental postions, company boards (the Norwegians are doing this), and most other jobs with perks.

I have come to be, personally, in favor of both.

9 thoughts on “The Dismal Science and women in the workplace

  1. Women have less opportunities at work (arguably) but they have a more wide spectrum of opportunities in life: they can choose to invest in work AND/OR they can choose to invest in having childs (in modern democracies the last word on this choice is almost totally theirs – and in some ways also in primitive societies). That’s more choices than men. When eighty (an age women reach more easily than men), having one or more grandchildren is probably more satisfactory than having been a CEO forty years before.

  2. Gianni: you’ve got to be kidding, right? It’s the first time I hear someone trying to argue that men are somehow less successful than women at having children and grandchildren. On the contrary, it seems to me that they reap the psychological benefits of progeny while hardly bearing any of the emotional costs.

  3. I’m not convinced affirmative action is a good tool for promoting women’s representation in business. For those in need of sleep, here’s why:

    First, affirmative action may foster rational discrimination rather than countering it. Take mandatory quota favoring women in corporate boards. A woman director may be suspected to hold her seat by law, not by merit. At the same time, her male colleagues’ ability may be overrated, as they had to overcome adverse regulation to get their seats. Shareholders picking a board member for certain corporate functions may still be biased against women as a result.

    Second, affirmative action beneficiaries rarely act in the interest of the minorities they belong to. A quota-appointed woman may feel reluctant to favor other women with her choices, as she would expose herself to potential conflicts of interest. Think of Clarence Thomas: of course, he was appointed to the US Supreme Court for his unmatched constitutional expertise…being Afro-American though, Justice Thomas has been on a mission to dash any suspect he benefited from his minority status – and in the process he voted against each and every piece of liberal legislation the Supreme Court has been ruling upon since his appointment. Nobody more than Justice Thomas contributed to repeal the legal framework originally meant to bridge the opportunity gap between races in the US.

    More in general, I believe it’s better to keep affirmative action out of the board room of large public companies simply because these entities compete for capital on a global scale. Tinkering with board selection criteria weakens public companies’ governance, harm their shareholders and eventually increase their cost of capital, especially in relation to international competitors with no quota obligations.

    For the record, I favor mandatory paternity leave. The most productive years for anyone pursuing a corporate career are between late 20s and early 40s. A woman raising a couple of infants may lose 15-20% of this limited timeframe. Paternity leave is a reasonable attempt to share parental duties more evenly but – where available – it is does not work quite as one would expect.

    A helpful Swede colleague who’s investigating the issue told me their government gives new parents an 18 months joint leave – provided that the father spends at least 3 months taking care of his child. Mother and father can split the leave period between them as they like but if the father does not stay at home for at least 3 months in a row, the combined leave goes down to 12 months.

    However mild these measures may look, I suspect most women working in industrialized nations won’t have a chance to see them implemented during their careers. As women keep working under unfair regulations, a precious ally can nonetheless still help them to butterfly out their talents: market economy.

  4. One could always adopt children despite sterilization. I don’t think there is any credible signal women can give to employers, nor would it actually matter if they could because discrimination is along other parameters as well.

    When I resigned from my last corporate job in favor of a higher status more lucrative position at another firm, the CEO told the entire company on the Monday morning call that I was leaving to “spend more time with my boyfriend.”

    Outstanding blog, btw! Another good economics resource you may know about is the EconTalk podcast (http://www.econtalk.org/).

  5. Dear Ed: please refer to Kramer and Konrad, “How Many Women Do Boards Need?”, Harvard Business Review, Dec. 1, 2006. They found that a lone woman on a corporate board (like a lone black Supreme Court judge) makes no difference to the board’s usual dynamics; however, once the number of women on the board reaches at least three (“critical mass”), more tough issues are put forth for discussion in board meetings, the quality of decision-making improves, and corporate governance is enhanced. Here another version of the article: http://ionwomen.org/pdf/news/criticalmass.pdf

  6. I am not arguing that females are less succesful of males in producing children (a single male can procreate by the dozen, if there are enough willing females). My point is: emotional and biological attachment to mother is a big bit different than attachment to the father. Moreover in modern democracies, the last word on having or not having a child is woman’s. The end result is that women in life have MORE choices than males: to invest in work AND/OR to invest in children.

    I’n not saying that is right or that is beautiful or that’s all well. I’m only saying that women have a more ample choice, if they want. That’s not an excuse for discrimination or less representation on politics or economics.

  7. I really thank you for finding the time for sharing this interesting piece. It would be even more interesting if besides considering boards of Fortune 1000 companies – which as far as I know are US-incorporated businesses with no quota obligations – would consider also companies subject to affirmative actions favoring women.

    No doubt boards with plenty of women directors work well – as long as all directors are appointed at shareholders’ total discretion. Not sure boards would still work this well if women owed their seats to some regulation limiting shareholders’ freedom of choice.

  8. Pingback: Four recipes to save Italy: “Meritocrazia” by Roger Abravanel « Live from Planet Paola

  9. Pingback: Italy and the 2008 Gender Gap Report: real or apparent progress? « Live from Planet Paola

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