About the author
Mark Perry Tweets
View related content: Carpe Diem
A year ago, Andrew Biggs and I wrote an op-ed about “The ’77 Cents on the Dollar’ Myth About Women’s Pay” that appeared in the Wall Street Journal, here’s an excerpt in honor of Equal Pay Day (today, April 14):
These 23% gender-disparity claims are also economically illogical. If women were paid 77 cents on the dollar, a profit-oriented firm could dramatically cut labor costs by replacing male employees with females [using the coupon above]. Progressives assume that businesses nickel-and-dime suppliers, customers, consultants, anyone with whom they come into contact—yet ignore a great opportunity to reduce wages costs by 23%. They don’t ignore the opportunity because it doesn’t exist. Women are not in fact paid 77 cents on the dollar for doing the same work as men.
MP: Maybe there should be an annual day in April that would bring public attention to the perpetuation of debunked statistical falsehoods that continue to be spread annually in April around the time of Equal Pay Day? Let’s see… Bogus Statistics Day? Debunked Statistics Day? Statistical Falsehood Day? Statistical Fraud Day? Statistical Fairy Tales Day?
View related content: Carpe Diem
The American Association of University Women (AAUW) is a major participant in the feminist propaganda machine that mobilizes its forces every April and engages in statistical falsehoods to publicize the bogus feminist holiday event known as Equal Pay Day. AAUW executive director Linda Hallman made this statement recently:
Think about it: Women have to work almost four months longer than men [until today, April 14] do to earn the same amount of money [as men] for doing the same job. What’s more, we have to set aside a day each year just to call the nation’s attention to it.
Hallman’s statement is a statistical fairy tale because it’s based on the false assumption that women get paid 23% less than men for doing exactly the same work in the exact same occupations and careers, working side-by-side with men on the same job for the same organization, working the same number of hours per week, traveling the same amount of time for work obligations, with the same exact work experience and education, with exactly the same level of productivity, etc. In other words, the AAUW and others assumes that employers all across America are using coupons like the one above to get a 23% wage discount for every woman they hire, and it’s that rampant and blatant gender discrimination that is the culprit behind the gender pay gap. For example, Sen. Gary Peters (MI-D) said that “Today, April 14th marks Equal Pay Day, the date by which women have made up for the wage discrimination they suffered during the previous year.” That’s complete statistical nonsense.
The reality is that you can only find a 23% gender pay gap by comparing raw, aggregate, unadjusted full-time median salaries, i.e. when you control for NOTHING that would help explain gender differences in salaries like:
- Hours Worked: The average man working full-time worked two more hours per week in 2013 compared to the average woman, see my analysis here.
- Type of Work: As I reported yesterday, men represented 93% of workplace fatalities in 2013 (and the male share of job-related deaths has been consistently that high in every previous year) because men far outnumber women in the most dangerous occupations like logging, mining and roofing that have the greatest probability of job-related injury or death.
- Marriage and Motherhood: a) single women who have never married earned 95.2% of male earnings in 2013; b) more women than men leave the labor force temporarily for child birth, child care and elder care, and c) women, especially working mothers, tend to value “family friendly” workplace policies more than men, according this Department of Labor study.
Most economic studies that control for all of those variables conclude that gender discrimination accounts for only a very small fraction of gender pay differences, and may not even be a statistically significant factor at all. For example, as Andrew Biggs and I pointed out in the WSJ a year ago:
In a comprehensive study that controlled for most of the relevant labor market variables simultaneously—such as that from economists June and Dave O’Neill for the American Enterprise Institute in 2012—nearly all of the 23% raw gender pay gap cited by the UUAW can be attributed to factors other than discrimination. The O’Neills conclude that, “labor market discrimination is unlikely to account for more than 5% but may not be present at all.”
On Equal Pay Day, when groups like the AAUW point to a 23% unadjusted gender pay gap and demand that the pay gap be completely eliminated, what they are really saying is that they want women to:
- Work longer hours on average like men do;
- Work in riskier, less safe occupations like logging and commercial fishing like men do where the chances of getting injured or killed are much greater;
- Work in more physically demanding occupations like farming, construction, roofing, logging and working on oil rigs, where they’d be working alongside men outside in 100 degree weather in the summer and below zero weather in the winter;
- Work less in family-friendly workplace environments like teaching elementary school that coincide with their children’s schedules (with summers off, etc.), and work more in less family-friendly workplace environments like being an over-the-road truck driver or being an oil field worker.
- Take less time off, or no time off, for child birth and child care to minimize their time away from the labor force that might affect their earnings.
Bottom Line: Those who publicize Equal Pay Day and demand that the unadjusted 23% pay gap be reduced to zero are unknowingly really advocating that men and women play completely interchangeable roles in the labor market and identical roles in their family responsibilities; and that’s an outcome I don’t think most women (or men) really want. As the Department of Labor concluded in 2009, “The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.” They also concluded that “the raw wage gap should not be used as the basis to justify corrective action.” Like for example the proposed corrective action known as The Paycheck Fairness Act, which is being promoted today on Equal Pay Day.
‘Equal pay day’ this year is April 14; the next ‘equal occupational fatality day’ will be on July 29, 2027
View related content: Carpe Diem
Every year the National Committee on Pay Equity (NCPE) publicizes its “Equal Pay Day” to bring public attention to what it claims is a 23% gender pay gap driven primarily by discrimination against women in the workplace. “Equal Pay Day” this year falls on April 14, and allegedly represents how far into 2015 the average woman has to continue working to earn the same income that the average man earned last year for doing the exact same job. Inspired by Equal Pay Day, I introduced “Equal Occupational Fatality Day” in 2010 to bring public attention to the huge gender disparity in work-related deaths every year in the United States. “Equal Occupational Fatality Day” tells us how many years and days into the future that women are able to work before they would experience the same number of occupational fatalities that occurred in the previous year for men.
The Bureau of Labor Statistics (BLS) tracks workplace fatalities and statistics for the most recent year (2013) are available here. Assuming those data will be representative for occupational deaths in 2014 (the gender shares of workplace deaths have been pretty consistent over time at about 93% male and 8% female), they can be used to estimate a new “Equal Occupational Fatality Day.” As in previous years, the chart above shows the significant gender disparity in workplace fatalities in the most recent year: 4,101 men died on the job (93.1% of the total) in 2013 compared to only 302 women (6.9% of the total). The “gender occupational fatality gap” in 2013 was considerable — nearly 14 men died on the job last year for every woman who died while working.
Based on the most recent BLS data, the next “Equal Occupational Fatality Day” will occur about 13 years from now – on July 29, 2027. That date symbolizes how far into the future women will be able to continue working before they experience the same estimated loss of life that men will experience in 2014 from work-related deaths. Because women tend to work in safer occupations than men on average, they have the advantage of being able to work for more than a decade longer than men before they experience the same number of male occupational fatalities in a single year.
Economic theory tells us that the “gender occupational fatality gap” explains part of the “gender pay gap” because a disproportionate number of men work in higher-risk, but higher-paid occupations like coal mining (almost 100 % male), fire fighters (96.5% male), police officers (86.6% male), correctional officers (72.8% male), logging (97.9% male), refuse collectors (95.2%), truck drivers (94.8%), roofers (99.3% male), highway maintenance (98.9%) and construction (97.4% male); BLS data here and see table above of the ten most dangerous occupations in the US, all heavily male-dominated. On the other hand, women far outnumber men in relatively low-risk, more family-friendly occupations, often with lower pay to partially compensate for the safer, more comfortable indoor office environments in occupations like office and administrative support (73.3% female), education, training, and library occupations (73.8% female), and healthcare (74.4% female). The higher concentrations of men in riskier occupations with greater occurrences of workplace injuries and fatalities suggest that more men than women are willing to expose themselves to work-related injury or death in exchange for higher wages. In contrast, women more than men prefer lower risk, family-friendly occupations with greater workplace safety, and are frequently willing to accept lower wages for the reduced probability of work-related injury or death.
Bottom Line: Groups like the NCPE use “Equal Pay Day” to promote a goal of perfect gender pay equity, probably not realizing that they are simultaneously advocating a huge increase in the number of women working in higher-paying, but higher-risk occupations like fire-fighting, roofing, construction, farming, and coal mining. The reality is that a reduction in the gender pay gap would come at a huge cost: several thousand more women will be killed each year working in dangerous occupations.
Here’s a question for the NCPE that I ask every year: Closing the unadjusted “gender pay gap” can only be achieved by closing the “occupational fatality gap.” Would achieving the goal of perfect pay equity really be worth the loss of life for thousands of additional women each year who would die in work-related accidents?
View related content: Carpe Diem
Over the last few months, I’ve featured more than a dozen Venn diagrams on CD, and thought it might be a good time to feature ten of those today in this post. Here are my top ten favorite CD Venn diagrams:
4. Venn Diagram IV on prices controls (below).
5. Venn Diagram on weed vs. vaping in California (below).
6. Venn Diagram I on gender activism (below).
7. Venn Diagram II on gender activism (below).
8. Venn Diagram on diversity on college campuses (below).
9. Venn Diagram on income and wealth diversity (below).
10. Venn diagram on the War on Beer vs. the War on Drugs.
More evidence that Wall Street is a conduit between public pension funds and Greenwich real estate agents
View related content: Carpe Diem
From the NY Times article this week titled “Wall Street Fees Wipe Out $2.5 Billion in New York City Pension Gains” (emphasis added):
According to a new analysis by the New York City’s comptroller’s office: the city’s five pension funds have paid more than $2 billion in fees [that’s $2,000,000,000] over the past 10 years to money managers and have received virtually nothing in return.
“We asked a simple question: Are we getting value for the fees we’re paying to Wall Street?” Comptroller Scott M Stringer said. “The answer, based on this 10-year analysis, is no.”
Until now, Mr. Stringer said, the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account. After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years.
“When you do the math on what we pay Wall Street to actively manage our funds, it’s shocking to realize that fees have not only wiped out any benefit to the funds, but have in fact cost taxpayers billions of dollars in lost returns,” Mr. Stringer said.
Mr. Stringer said the returns on investments in publicly traded assets, mostly stocks and bonds, have traditionally been reported without taking fees into account. The fees have been disclosed only in footnotes to the funds’ quarterly statements, he said.
The stakes in this arena are huge. The city’s pension system is the fourth largest in the country, with total assets of nearly $160 billion. It holds retirement funds for about 715,000 city employees, including teachers, police officers and firefighters.
Most of the funds’ money — more than 80% — is invested in plain vanilla assets like domestic and foreign stocks and bonds. The managers of those “public asset classes” are usually paid based on the amount of money they manage, not the returns they achieve.
Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion. But nearly all of that extra gain — 97% — has been eaten up by management fees, leaving just $40 million for the retirees.
Figuring out just how big a drag the fees were on the expected returns of the funds overall was not easy. Scott Evans, the comptroller’s chief investment officer, had to work backward from the footnotes in the reports to estimate just how much had been paid each year to a long list of Wall Street firms that managed investments in the public markets. He then calculated that those fees, combined with the significant under-performance of the investments in private assets like real estate, amount to a whopping negative — a drag of more than $2.5 billion — since the end of 2004.
MP: So NYC’s five pension funds paid Wall Street money managers more than $500,000 every day in fees for the last 10 years ($2 billion in total) and those “investment experts” dragged the overall returns of the pension funds $2.5 billion below expectations over the last 10 years!
Related: “Two hedge fund managers walk into a bar” by The Motley Fool’s Morgan Housel.
HT: Warren Smith
As Tax Day approaches, let’s thank top 20% for shouldering 84% of the income tax burden with only 51% of US income
View related content: Carpe Diem
The Wall Street Journal has an article today titled “Top 20% of Earners Pay 84% of Income Tax,” with the sub-title “And the bottom 20%? They get paid by Uncle Sam. We compare tax burdens as Tax Day approaches.” Here’s the article’s opening:
Who pays what in income taxes? With April 15 just around the corner, filers may be curious about where they fit into the system as a whole.
The individual income tax remains the most important levy in the U.S., providing nearly half of federal revenue. This is unusual: On average, most developed nations get only one-third of their revenue from income taxes. Typically they also impose national consumption taxes, such as a value-added tax, that raise as much revenue as their income tax.
The pressure on the U.S. income tax has prompted lawmakers on both sides of the aisle to seriously consider a national consumption tax. But liberals worry that such a levy could unduly burden the poor, while conservatives fear it would be too easy to dial up the rate and collect more revenue. As a result, experts say, there is little chance of tax overhaul this year.
Meanwhile, these two tables offer a snapshot of who is paying what for the 2014 tax year.
Most of the data in the WSJ’s two tables are summarized in the two charts above. Here’s a description of the data and an analysis of what the data show:
The data comes from estimates by the nonpartisan Tax Policy Center, a Washington-based research group, as Internal Revenue Service data for 2014 won’t be available for at least two years. Unlike IRS data, it includes information about nonfilers—both people who didn’t need to file and people who should have filed but didn’t. The total also includes Americans living overseas and others, which is why it is greater than the U.S. Census estimate of 319 million.
Another important difference: The income cited on the table includes untaxed amounts for employer-provided health coverage, tax-exempt interest and retirement-plan contributions and growth, among other things. This can be significant.
The tables show just how progressive the income tax is. The three million people in the top 1% of earners pay nearly half the income tax.
Why is the share of income taxes negative for 40% of Americans? In recent decades Congress has chosen to funnel important benefits for lower-income earners through the income tax rather than other channels. Some of these benefits, such as the Earned Income Tax Credit and the American Opportunity Credit for education, make cash payments to people who don’t owe income tax.
MP: As the WSJ points out, the US federal income tax system is very progressive – higher income groups pay increasingly higher tax rates, and therefore disproportionately higher and higher shares of the total income taxes collected. A couple key points below based on the two charts above:
1. The top 20% of Americans earn about half of all income (51.3%) and pay almost all income taxes (84%), see top chart. That top fifth is the only quintile whose tax share exceeds its income share – all bottom four quintiles have a lower tax burden as a share of the total taxes paid than their income as a share of the total. For example, the second highest quintile (with incomes of $79,500 to $134,300) earns 20% of US total income as a group, but shoulders only 13.4% of the total US income tax burden.
2. Both of the bottom two quintiles pay negative income taxes, and are therefore net tax recipients (see top chart). The 130 million Americans who represent the bottom 40% “get paid by Uncle Sam” as the WSJ says, or more accurately they “get paid by the top 60%” since Uncle Sam has no money of his own, and can only extract taxes from one group and redistribute to another group. That is, Uncle Sam is not reaching into his own pockets to pay the bottom 40%, he’s reaching into your pockets if you make more than $47,000, the threshold income level to be in the top 60%.
3. As the WSJ points out, the top 1% of Americans (about 3.2 million people) earn about 17% of total US income, but pay almost as much in taxes (about 46% of the total) as the 322 million people in the bottom 99% (they pay 54% of taxes while earning 83% of US total income), see bottom chart above. Similarly, the top 5% (about 16 million Americans) earn about 29% of total income but pay almost two-thirds (64%) of income taxes paid, while the 309 million Americans in the bottom 95% pay only 36% of total income taxes paid but earn roughly 83% of US total income, see bottom chart.
More on income taxes:
Bottom Line: I’m probably in the minority, but as Tax Day approaches and as we analyze and compare tax burdens, I would like to personally express my sincere gratitude to: a) the 3 million Americans in the top 1% with incomes above $615,000 for shouldering almost half of the total US income tax burden with only 17% of the total income, b) the 16 million Americans in the top 5% with incomes above $261,000 for bearing almost two-thirds of the income tax burden with only 29% of the total income, and c) the 65 million Americans in the top 20% with incomes above $134,000 for shouldering almost the entire tax burden (84%) with only about half (51%) of total US income. Thank you entrepreneurial, hard-working, successful Americans in the top 20% for shouldering such a disproportionate share of the total federal income tax relative to your income – you’ve helped to ease the tax burden on the rest of us in the bottom four quintiles.
Univ. of Michigan president Mark Schlissel’s inauguration speech, adjusted for a recent campus event
View related content: Carpe Diem
The text below combines part of University of Michigan president Mark Schlissel’s inauguration speech last year with a news report today by Michigan student Derek Draplin for the College Fix (in bold):
As members of the University of Michigan community, we will always seek out, encourage, and value all voices. One of the most important modes of learning is through discussion – in the classroom, at public lectures, in residence halls and in student organizations. That is why I am concerned about recent trends that can diminish learning opportunities in a misguided effort to protect students from ideas that some might find offensive or disturbing.
Last spring, such accomplished individuals as former Secretary of State Condoleezza Rice, IMF Director Christine Legarde, and Chancellor Emeritus Robert Birgeneau of UC-Berkeley were disinvited or felt forced to withdraw as graduation speakers at prominent institutions because others disagreed with their work, their presumed beliefs, or the organizations they led.
Just this week, a scheduled movie screening of “American Sniper” at the University of Michigan was abruptly cancelled after nearly 300 students and others complained the film perpetuates “negative and misleading stereotypes” against Muslims. The Center for Campus Involvement intended to show the film on Friday, but decided at the last minute that “the impact of the content was harmful, and made students feel unsafe and unwelcome.”
This type of wrongheaded courtesy and political correctness weakens the frank discussions that might otherwise lead to heightened understanding. Ideas go unchallenged. Opportunities for learning and growth are missed.
This is what great universities do: We encourage all voices, no matter how discomforting the message. It takes far more courage to hear and try to understand unfamiliar and unwelcome ideas than it does to shout down the speaker. You don’t have to agree, but you have to think.
This is challenging work. Not only building a diverse student body, but also creating an inclusive campus climate that is open to difficult discourse.
Update: Via The College Fix: “In the wake of national uproar over the decision by the University of Michigan to cancel a screening of “American Sniper,” campus leaders late Wednesday completely reversed that call, announcing the film will be shown at its originally scheduled time and location.”
View related content: Carpe Diem
Between 1998 and 2014 the price of medical care services in the US (as measured by the BLS’s CPI for Medical Care Services) has increased by 88.5%, or more than twice the 45.8% increase in consumer prices in general over that period (data here), see bottom of table above. On an annual basis, medical care costs in the US have increased more than 4% per year compared to an average inflation rate of only 2.4% over the last 16 years. Probably the only consumer product or service that has increased more than medical care costs over the last several decades would be college tuition and fees, which have increased more than 7% annually since 1998.
One of the reasons that medical care costs in the US have increased almost twice as much as general consumer prices since 1998 is that a large and increasing share of medical costs are paid by third parties (private health insurance, Medicare, Medicaid, Department of Veterans Affairs, etc.) and only a small and shrinking percentage is paid out-of-pocket by consumers. According to data from the Census Bureau, almost half (47%) of health care expenditures in 1960 were paid by consumers out-of-pocket, and by 1990 that share had fallen to 20% and by 2009 to only 12%. It’s no wonder that health care costs have risen as the share of third-party payments has risen to almost 90% and the out-of-pocket share approaches 10%. Consumers of health care have no incentive to monitor prices and be cost-conscious buyers of medical services when they only pay 10% themselves, and the incentives of medical care providers to hold costs down are greatly reduced knowing that their customers aren’t price sensitive.
How would the market for medical services operate differently if consumers were paying out-of-pocket for medical procedures in a competitive market? Well, we can look to the $7.5 billion US market for elective cosmetic surgery for some answers. In every year since 1997, the American Society for Aesthetic Plastic Surgery has issued an annual report on cosmetic procedures in the US (both surgical and nonsurgical) that includes the number of procedures, the average cost per procedure (starting in 1998), the total spending per procedure, and the age and gender distribution for each procedure and for all procedures. Here is a link to the press release for the 2014 report, and the full report is available here.
(Note: Interestingly, there is a huge gender imbalance for cosmetic procedures – women accounted for 90% of the 10.6 million cosmetic procedures last year.)
The table above (click to enlarge) shows the top five most popular surgical procedures and top five most popular non-surgical procedures for 2014, the number of each of those procedures performed last year, the total expenditures for each procedure, the average price per procedure both in 1998 and 2014 (in current dollars), and the percent increase in price since 1998 for each procedure. Here’s what’s interesting:
1. For the top ten most popular cosmetic procedures last year, none of them has increased in price since 1998 more than the 45.8% increase in consumer price inflation (the price for the hyaluronic acid procedure wasn’t available for 1998), meaning the real price of all of those procedures have fallen over the last 16 years.
2. For three of the top five favorite non-surgical procedures in 2014 (botox, laser hair removal and chemical peel), the nominal prices have actually fallen since 1998 by large double-digit percentage declines of -23.6%, -31.2% and -30.1%. That is, those prices have fallen in price since 1998, even before making any adjustments for inflation.
3. Most importantly, none of the ten cosmetic procedures in the table above have increased in price by anywhere close to the 88.5% increase in medical care services since 1998. The 33.7% average price increase since 1998 for last year’s top five most popular surgical procedures, isn’t even close to half of the 88.5% increase in the cost of medical care services over the last 16 years.
4. For the other dozen or so cosmetic procedures not displayed above, but for which there are prices both in 1998 and 2014, there were only three procedures that increased in price by more than the 45.8% increase in general prices, but the price increases were all below the 88.5% increase in the cost of medical services: chin augmentation (+69.7%), upper arm lift (+65.3%) and buttock lift (+46.7%).
MP: The competitive market for cosmetic procedures operates differently than the traditional market for health care in important and significant ways. Cosmetic procedures, unlike most medical services, are not usually covered by insurance. Patients paying out-of-pocket for cosmetic procedures are cost-conscious, and have strong incentives to shop around and compare prices at the dozens of competing providers in any large city. Because of that market competition, the prices of almost all cosmetic procedures have fallen in real terms since 1998, and some non-surgical procedures have even fallen in nominal dollars before adjusting for price changes. In all cases, cosmetic procedures have increased in price by less than the 88.5% increase in the price of medical care services between 1998 and 2014.
Question: If cosmetic procedures were covered by insurance, Medicare and Medicaid, what would have happened to their prices over time? Basic economics tell us that those prices would have most likely risen at about the same 88.5% increase in the prices of medical services between 1998 and 2014. And perhaps another economic lesson here is that the greater the degree of market competition, price transparency and out-of-pocket payments, the more contained prices are, in health care or any other sector of the economy. On the other hand, the greater the degree of government intervention, opaque prices and third-party payments, the less contained prices are, in health care or any other sector of the economy.
HT: Vincent Geloso, whose post here inspired this one.