The latest hit to taxpayers: Pay “equity” salaries based on apple-banana comparisons

Mark Milke, The Western Standard, April 16, 2022

Last month the Conservative government of Doug Ford ran an advertorial story in the Globe and Mail arguing that “pay equity is key [to an] inclusive economic recovery.”

The newspaper noted it originated with the Ontario government’s Pay Equity Office. A problem: So-called pay equity has nothing to do with equality between the sexes, i.e., equal pay for equal work by men and women performing the exact same job. It is instead about the rubbery concept of equal pay for work of equal “value.”

To grasp the difference and why pay equity is flawed concept, imagine an all-female law firm composed of 100 women who all started work at the same time. Further envision that all of the women attended the same law school, received exactly the same grades and graduated the same year. Then pretend that all 100 lawyers joined the same law firm on the same date and work exactly the same billable hours at the same rates.

Now imagine that five years after starting, half the female lawyers quit the law firm on the same day. Those 50 lawyers each raise children for a decade but all return exactly 10 years later to the same firm.

Question: Should the 50 female lawyers who gave up practicing law for ten years, when they return, be paid the same as the 50 female lawyers who never quit and now have 15 years’ experience?

If your answer is “No, because the first group has 10 years more time in with more experience,” then you just spotted the problem with so-called “pay equity” arguments including those advanced by Ontario’s pay equity office.

In the Globe Ontario government advertising piece, Kadie Ward, commissioner and CAO of Ontario’s Pay Equity Commission, pointed to average wage disparities as proof that workplaces are discriminatory. She pointed to a 29 percent “gap” between the annual average earnings of men and women in Ontario. 

Ward argued that “Inequalities persist in the labour force because of the continued devaluation of work historically or typically done by women,” i.e., that hidden or active discrimination is in play against women in the workforce. 

Should five years experience be worth the same as 15 years?

Ward’s reasoning is flawed for the same reason that 50 female lawyers with 15 years experience would expect higher salaries and higher pay relative to female lawyers with just five years experience: Because differences in “inputs”—years worked in my example—lead to differences in “outputs,” i.e., what the senior lawyers can charge vis-à-vis their now less experienced colleagues. 

This hypothetical example might provoke this rejoinder: That’s not the real world.

Exactly, which is why comparing averages among any cohorts—women to men, recent immigrants to long-time citizens, Indigenous to other Canadians—is always an analytical, statistical mistake: Because averages tell you nothing about hours worked, education levels, geography, work experience and much else.

Pay equity is not about exact same jobs but spurious notions of equal “value”

The other major problem with pay equity is the language itself. A lot of people will see the two words—“pay” and “equity” and assume what’s being discussed is the notion of equal pay for the exact same job.

But discrimination in employment pay based on gender has been illegal since the 1950s in Ontario. Ontario passed the Fair Employment Practices Act) to ban religious and race discrimination in the workplace in 1951. In 1954, the province also made it illegal to discriminate in lodging based on religion or race (the Fair Accommodation Practices Act).

Other provinces have also had such legislation on the books for at least half a century or more. Thus, if an engineering firm, for example, hired a woman and a man for the exact same job classification and paid them differently, the woman could sue, win massive damages, and retire early.

Pay equity’s underlying assumption is that female-dominated professions were paid less then male-dominated professions because the former were female-dominated.

Occasional examples might exist but the general assumption is too broad. Historically, before the last few decades, female-dominated occupations such as clerical work paid less than a male-dominated trade such as plumbing. The reason for that was not discrimination: Plumbing required attending a trades school and that profession thus had (and has) a higher barrier to quick entry.

In contrast, clerical work requires less formal training if any. It means that a young person who wants a job quickly, or mothers without other education returning from raising their kids can enter that profession with relative ease. It also means that there is almost always a greater supply of workers for such work than for plumbing, where less flexibility was in play. A limited supply of potential workers (plumbing) was always going to put upward pressure on wages relative to a low-barrier entry job (clerical work) where the pool of workers was large irrespective of the sex of the people in the profession.      

Averages tell you nothing about other factors

 Statistical averages on incomes also tell you nothing about societal changes which take decades to work out. 

Let’s suppose most of Immigrant Group A arrived here 70 years ago, just after World War Two, while Immigrant Group B just began arriving in the year 2000. Given that newcomers are always at a disadvantage—they don’t always know the language or lack Canadian credentials—no one would expect their average or median incomes to equal those of a cohort whose parents, or grandparents arrived in Canada decades or even hundred of years before.

The children and grandchildren of immigrants—one they grow up and are in the workforce—demonstrate incomes similar to other native-born Canadians. But when the bulk of a cohort is first-generation, their average and median incomes will always be less because they can’t magically re-start the first decades of their lives in a new country and catapult ahead of others who themselves spent decades working their way up the career ladder.      

Consider Canadians whose ancestry is Somalian, most of whom arrived in Canada in recent decades versus those whose lineage goes back further, and/or who have higher education levels. Those of Somali origin who worked full-time, full-year (this from Census 2016) showed median incomes of $36,773 in 2015. Meanwhile, those of Taiwanese origin who worked full-year full-time showed median incomes of $50,934 that year.

The difference can be explained by at least two factors: relative to the Sudanese cohort, a greater proportion of those with Taiwanese heritage were either born in Canada and/or had higher education levels upon arrival which in their case also were more easily transferable to Canada’s economy.

Geography also affects incomes

There is another factor in all this and it speaks to the value of apple-apple comparisons as opposed to apple-banana comparisons: Geography. This shows up in data about the incomes of indigenous Canadians, where 39% live in communities with fewer than 1,000 people. That compares to non-indigenous Canadians where only 19% live in communities with under 1,000 people.

Why does this matter? Because on average, incomes are lower in rural communities than in urban centres. Cities have educational and career opportunities lacking in rural areas, especially First Nations reserves, where, obviously, most residents are Indigenous. That location thus drags down average and median incomes when you look at indigenous statistics. 

More positively, when you dig into the statistics and find apple-apple comparisons, it turns out that similar Canadians earn similar incomes.

Apple-apple comparisons bust the myth of discrimination

The best example of this is how young adults between the ages of 25 and 34, indigenous or non-indigenous, earn virtually the same if they have a university degree and work full-time, full-year. The indigenous young adults in that cohort who have a bachelor’s degree or above showed a median income of $43,445 in the last census; that was $99 higher than non-Indigenous young adults with the same characteristics, who earned $43,346 that year.

The final problem for pay equity assertions is that “value” claim, as if beyond market realities of supply, demand, skills and much else there was some way to objectively measure one job over another. But that too is an anti-reality fantasy.

Let’s compare two male-dominated professions

After all, there is a male-dominated profession that pays very little despite how dangerous it is to one’s life and limb: soldiering. There is another male-dominated profession that pays very well: playing NHL hockey. I wasn’t able to find averages or median incomes for soldiering in Canada but whatever those might be, they surely pale in comparison to the average NHL salary in 2021: Over $2.5 million USD or over $3 million CDN.

I was able to find starter and top salaries for both professions and these are telling: The lowest, starting level of pay for a private in the Canadian Armed Forces was $38,016 for a P-1 Private. It appears that the highest salary was $181,284, for a Chief Warrant Officer at the top rung and with the most years served. Starting NHL salaries were pegged at $750,000 USD or $917,000 CDN last year with the highest at $16.3 million USD or about $20 million CDN.

There are multiple reasons why the two professions vary dramatically in pay: People will pay a lot of money to watch men chase a black puck but relatively little through taxes to see a soldier do his (or her) work. Advertisers contribute massively to NHL salaries as well.

Point: As much as fans like their hockey games, no one worth a pinch of reason would assert NHL players are actually equal in value in some self-sacrificing moral sense to soldiers. Soldiers are more valuable than NHL players but it would be an extreme position to assert that the valued members of Canada’s Armed Forces should equal or exceed NHL players in compensation. 

When governments such as Doug Ford’s Conservative one in Ontario claim that Ontario or all of Canada is unequal and use pay equity arguments to do so, remember that they’re using averages. That tells you nothing about geography, education levels, ancestral time in Canada, hours worked every day or every year, and much else. They’re not even talking about exact same pay for the exact same job but porous equal “value” comparisons.

Lastly, the arguments for government social engineering of higher pay for different jobs has much to do with government unions. I first wrote about this in 1997 (!) in the Financial Post when the federal government was “ordered” to hike the pay and perks of female-dominated government classifications in civil service.

Back then, I began getting phone calls and emails from female entrepreneurs who saw exactly what would happen: government-paid labour would become expensive and have a knock-on effect on what the private sector was forced to pay regardless of whether—for example, a small business owner could afford it. That was confirmed a few years back when a Fort MacMurray female entrepreneur who provides health care services told me she had to pay whoppers of salaries to clerical workers even in recessions in order to compete with taxpayer-funded clerical salaries in government.

Back in the 1990s or more recently, it has thus been women in the private sector who were the most outraged about this as they saw this as an expensive sop to government unions and with the hard-earned tax dollars of those same entrepreneurs and others.

Mark Milke is president of The Aristotle Foundation for Public Policy, a new think-tank set for launch later this year. His most recent book is The Victim Cult: How the culture of blame hurts everyone and wrecks civilizations. Image credit: Pixabay.