Very Different Visions of Fairness

By temperament and habit I tend to see people as more alike than different. Thus I was struck by how dramatically different Washington Post columnist E. J. Dionne, Jr. sees the world than I do when he was discussing false choices. I think that it is worth illuminating and exploring this difference for what it implies about the nature and role of government we each want.

In his column Monday Dionne quoted himself from a book he had written twenty years ago:

“Women who take time off from their careers to care for young children are routinely ‘punished’ by having their opportunities for promotion reduced,” I wrote. “Is it ‘feminist’ or is it ‘pro-family’ to suggest that this practice is unfair? Is it ‘feminist’ or ‘pro-family’ to contend that this practice shows how little value society really places on the work that parents do?”[1]

I am sure that he finds nothing shocking in these words (or he wouldn’t have quoted them) but I do. Why is it that someone who leaves the labor force for a few years is “punished” by “having their opportunities for promotion reduced?” It is not because they are women or because they are rearing children, because the same would be true for a man (or woman) serving in the Peace Corps for a few years. It is, of course, because to a very large extent companies promote on the basis of productivity (competence, experience, effort, etc). Some of these capacities are gained from actually working (on the job experience) such that a 40-year-old worker who was with the company (or in a particular profession or line of work) for twenty years is likely to be more productive (i.e. worth paying more) than one that took out five years for the Peace Corps (or whatever).  In a competitive market economy companies that do not behave this way will lose out to those that do. In a perfectly competitive economy companies are forced by competitive survival to ignore race, sex, family relationship, or any other factor than productivity.

Dionne takes for granted that this practice, when it results in delayed promotion for a young mother (rather than the Peace Corps volunteer), is unfair and asks whether calling it such is feminist or pro-family (hence the false choice he is discussing). He adds that this practice (promotion based on productivity) “shows how little value society really places on the work that parents do?” By society he presumably means the employers who promote based on productivity, or does he mean a society that would allow employers to do this?

What is the alternative Dionne has in mind? The corrupting seniority system of the civil service would not over come this “unfairness” because time off would reduce seniority. Somehow employers would have to be prevented from basing promotion on productivity in the case of women who take a few years off to raise a family. They might be shamed out of it (social pressure), but the competitive market place that has given us such a high standard of living would punish them for such behavior. The law might forbid such unfairness to mothers. Because the market place will punish firms that promote less productive workers whether the law requires it or not, such a law would create a strong incentive for firms to avoid hiring women in the first place (an unintended consequence).

Mr. Dionne is clearly advocating a society in which employers are expected to promote workers on the basis of how much “society” values them and their non/extra work activities rather than on the basis of their value to the firm (productivity and hence their contribution to our material standard of living).

An example of such a society was the American South in the first half century after the end of slavery. Firms were expected to hire and promote blacks in accordance with social expectations, which looked down on blacks. Mr. Dionne would certainly disagree with the social values that discriminated against blacks but it is an example of how a society functions when it attempts to impose its (the dominate segment’s) non-economic values into economic processes. While racial and ethnic prejudices seem imbedded to some extent in human nature (we would rather hire a cousin than a stranger), competitive market forces work against giving much scope to such biases. Prejudice has a cost in the market place.

Leaving the labor market to raise a family or to service in the Peace Corps is laudable. In the case of raising a family it is essential to the survival of mankind. But it is a personal choice. The person making that choice does so knowing that there will be career consequences. I don’t want to over simplify. The experience of raising a family or of servicing in the Peace Corps may help develop capacities that will promote productivity when the person returns to the labor force. But evaluating that is best left (can only properly be left) with the employer whose bottom line is at stake. Employers can and will make mistakes but at least, unlike bureaucrats administering rules, they have a financial incentive to get it right.

When society (a much overused word) values and benefits from activities that are not rewarded in the market place, they are likely to be undersupplied. Attempting to remove this gap between public and private benefit is challenging and fraught with risks of doing more harm than good. Nature has provided men and women with a strong desire to procreate and raise successful families. But most societies, and certainly ours, have encouraged that propensity and the social benefit of an educated and law-abiding citizenry by, for example, subsidizing elementary education. But we interfere with the efficiency of a competitive labor market at our peril.

[1] E. J. Dionne, Jr. “The real value of false choices”, The Washington Post, April 25, A15

Author: Warren Coats

I specialize in advising central banks on monetary policy and the development of the capacity to formulate and implement monetary policy.  I joined the International Monetary Fund in 1975 from which I retired in 2003 as Assistant Director of the Monetary and Financial Systems Department. While at the IMF I led or participated in missions to the central banks of over twenty countries (including Afghanistan, Bosnia, Croatia, Egypt, Iraq, Israel, Kazakhstan, Kenya, Kosovo, Kyrgystan, Moldova, Serbia, Turkey, West Bank and Gaza Strip, and Zimbabwe) and was seconded as a visiting economist to the Board of Governors of the Federal Reserve System (1979-80), and to the World Bank's World Development Report team in 1989.  After retirement from the IMF I was a member of the Board of the Cayman Islands Monetary Authority from 2003-10 and of the editorial board of the Cayman Financial Review from 2010-2017.  Prior to joining the IMF I was Assistant Prof of Economics at UVa from 1970-75.  I am currently a fellow of Johns Hopkins Krieger School of Arts and Sciences, Institute for Applied Economics, Global Health, and the Study of Business Enterprise.  In March 2019 Central Banking Journal awarded me for my “Outstanding Contribution for Capacity Building.”  My recent books are One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina; My Travels in the Former Soviet Union; My Travels to Afghanistan; My Travels to Jerusalem; and My Travels to Baghdad. I have a BA in Economics from the UC Berkeley and a PhD in Economics from the University of Chicago. My dissertation committee was chaired by Milton Friedman and included Robert J. Gordon.

3 thoughts on “Very Different Visions of Fairness”

  1. I agree with you on the whole, I see everyday the consequences of delusions similar to those Dionne seems to be advocating. On the other end, a well structured society can do a lot to encourage women and promote natality, see the scandinavian policies to that effect.

  2. In effect, what Dione proposes is an intervention against the free choice of consumers and the property rights of shareholders. Where does this “feel good” intervention on behalf of alleged stakeholders begin and end? Is government control intended or unintended by Dione? Does the same intervention logic apply to force in foreign affairs as well?

  3. How can both sides of a discussion be partially near the mark at the same time. Well, it seems very easily as the above discussion of the merits of this or that approach towards would be mothers in an operating economy show. it’s probably the case that as an economy is forced more and more to reduce side benefits of working for a given employer, such as baby minding because that firm would go out of business, this produces social pressures and social change. The economy and the society that sits above or below that economy are codependent and correlational. We see smaller families in wealthier advanced economies as fathers incomes alone cannot afford tuition fees that have no single economy logic, but are definable as an international resource or product. The costs of having a family of two can rise such that it becomes a real issue as to whether a couple might have a family at all. Overshoot elephants with tusks and you end up with a population of elephants with no tusks or small tusks. It’s a matter of evolution or social engineering. So it is in America that to raise educational costs to the international market rate results in a smaller population of educated people and eventually a country that cannot compete internationally and has no family life to speak of. So it is that if a society meddles with one social good other social good are impacted.

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