Discrimination not main cause of Ontario’s ‘Gender Wage Gap’

By Ben Eisen of The Fraser Institute.

"Recently, Ontario’s Ministry of Labour published a report on the “Gender Wage Gap” in Ontario. The National Post quickly published a story about the study, repeating its headline statistic that women earn, on average, about 70 cents for every dollar a man takes home.

The Post article’s was not sufficiently critical of the report’s analysis, and may therefore leave many readers with the impression that Ontario’s labour market is rife with wage discrimination, and that women generally earn far less money than men for similar types of work.

This is a myth. The notion that women face wage discrimination of anything approaching the magnitude of 30-cents-on-the-dollar (tantamount to a 30 per cent wage gap) has been widely discredited, and springs from a crude comparison of the average annual earnings for all earners, which ignores key variables such as job tenure, weekly hours worked, education or the occupations people choose.

In fact, the Ministry of Labour itself helps demonstrate this reality in Figure 6 of its report, which shows recent trends in the “gender wage gap” by average hourly earnings as well as average annual earnings. If you adjust this data for the number of hours worked, the average hourly wage gap in 2014 between men and women shrinks to 11.9 per cent—far below the 30 per cent (or 70 cents for every dollar) headline figure.

Controlling for the number of hours worked in a typical week therefore explains most of the supposed 30 per cent gender wage gap. Much of the remainder can be explained by other observable differences between men and women including the occupations they choose to enter.

For example, men disproportionately choose to enter high-paying fields such as mechanical engineering and computer sciences, whereas women are much more likely to enter lower-paying fields such as social work and early childhood education. American author and scholar Christina Hoff Sommers has shown that, when analyzing data, controlling for an individual’s choice of college major causes much of the supposed wage gap to disappear. In other words, comparably skilled, educated and experienced men and women working similar numbers of hours in similar professions tend to earn about the same amount of money.

The existing research does not preclude the possibility that some small share of the observed wage gap between men and women could be the result of “statistical discrimination” driven by the fact that some employers prefer to hire young men over young women due to a woman’s greater likelihood (on average) of taking time off or leaving the workforce entirely due to pregnancy and/or child-rearing. The extent of this type of discrimination is poorly understood, but it can explain only a small share of the wage gap identified by Ontario’s Ministry of Labour.

Citing the fact that women earn, on average, 70 per cent as much money as men may make for good headlines, but it doesn’t prove the existence of significant gender discrimination in Ontario’s labour market. Because, again, simple adjustments (number of hours worked, occupations people choose) cause most of the apparently alarming 30 per cent wage gap to disappear.

There are legitimate conversations to be had about the effect of gender discrimination on women’s employment prospects and the appropriate policy response, but these are not aided by the repetition of misleading statistics that give a grossly overstated impression of the extent and nature of the problem."

Ethanol is a failure

By Mark Perry.

"Only in the skewed reality of an industry-funded special interest lobbying group could a government-mandated policy forcing an artificial market for corn ethanol on the American public be passed off as a conservative, free market policy. And yet, corn ethanol’s newest cheerleader – a lobbying group called Americans for Energy Security and Innovation -- is attempting to make the case that this failed mandate is a silver bullet for achieving energy security, improving our environment, and saving consumers pain at the pump. It’s a flawed position that isn’t supported by the scientific and economic facts.

If there’s anything we know about Washington lobbying groups (as well as politicians), it’s that just because they say something, it doesn’t mean it’s true. And in the case of corn ethanol lobbyists, that couldn’t be more spot-on. Here’s the reality that the ethanol lobby refuses to acknowledge – America is more energy secure today than at any time since the early 1970s thanks to American free-market ingenuity and revolutionary made-in-the-USA technologies that have unlocked our country’s abundant shale resources. 

Yet after a decade of nearly every imaginable form of government corporate welfare – including an artificially guaranteed market regardless of what consumers want as well as billions of dollars in taxpayer subsidies – it’s clear that corn ethanol has failed by virtually every measure. 

Americans for Energy Security and Innovation spokesman Jim Talent is right on one issue in his recent column (“Obama’s Carbon Emission Hypocrisy”), writing that “the President [Obama] is focusing on dubious solutions” to address climate change. What is conveniently left out, however, is that doubling-down on corn ethanol is itself a dubious solution, causing great harm to our environment and American consumers. 

But don’t take my word for it. Former vice president and environmentalist Al Gore has said the corn ethanol mandate “was not good policy” and that this policy “was a mistake.” Scores of environmental advocates – such as the Environmental Working Group, Sierra Club, and Friends of the Earth – echo Gore’s concerns and remain staunchly opposed to corn ethanol because of its significantly negative environmental impacts.

Why? Because study after study continues to clearly demonstrate, in no uncertain terms, that corn ethanol’s total climate impacts are     actually making our environment worse, not better. In fact, a new study from University of Tennessee experts concludes that the Renewable Fuel Standards (RFS) deep if not singular over-reliance on corn ethanol is significantly increasing greenhouse gas emissions. Similar studies from experts at the University of Michigan and University of Minnesota have analyzed corn ethanol’s total emissions impact, concluding that corn ethanol is 70 to 100 percent worse for the environment than gasoline. 

What’s more, the EPA’s Inspector General recently launched an investigation into the full climate impacts of the RFS, including a review of corn ethanol’s complete emissions profile. And in a Congress that can’t agree on much these days, there’s considerable bipartisan agreement to repeal the failed corn ethanol mandate.

The timing for meaningful reform couldn’t be better, as the EPA is getting ready to announce new corn ethanol blending levels that could force even more government-mandated and subsidized ethanol into a saturated market that doesn’t want it. In fact, only six percent of the cars on the road today, according to the AAA, can safely handle ethanol-blended fuel with levels higher than the 10 percent blend that’s most widely available.

Further, the ethanol lobby’s claim that corn ethanol has reduced gas prices is flawed. Put the silly politics aside and look exclusively at the chemistry. Ethanol is less energy dense, providing consumers with 27 percent lower fuel economy compared to traditional gasoline. That means consumers have to burn a lot more ethanol-based fuel to drive the same distance, unnecessarily eating away at increasingly tight family budgets.

While ethanol’s Washington lobbyists continue to clamor for government-guaranteed markets, mandates, and handouts to artificially prop up biofuels, America has surpassed Saudi Arabia and Russia to become the world’s No. 1 oil and natural gas producer. And we didn’t achieve that remarkable energy outcome because the government picked winners and losers.

Here’s a suggestion for President Obama as he continues to weave together his environmental legacy: Listen carefully to environmentalist and fellow Democrat Al Gore (albeit briefly) and put a nail in the coffin of the broken corn ethanol mandate. For once, he’s got it right.

Perry is a resident scholar at The American Enterprise Institute and a professor of economics at the Flint campus of The University of Michigan."

Free Market Food Banks

By Alex Tabarrok of Marginal Revolution.

"Feeding America, the third largest non-profit in the United States, distributes billions of pounds of food every year. Most of the food comes from large firms like Kraft, ConAgra and Walmart that have a surplus of some item and scarce warehouse space. Feeding America coordinates the supply of surplus food with the demand from food banks across the U.S.

Allocating food is not an easy problem. How do you decide who gets what while taking into account local needs, local tastes, what foods the bank has already, what abilities the banks have to store food on a particular day, transportation costs and so forth. Alex Teytelboym writing at The Week points out:

…Before 2005, Feeding America allocated food centrally, and according to its rather subjective perception of what food banks needed. Headquarters would call up the food banks in a priority order and offer them a truckload of food. Bizarrely, all food was treated more or less equally, irrespective of its nutritional content. A pound of chicken was the same as a pound of french fries. If the food bank accepted the load, it paid the transportation costs and had the truck sent to them. If the food bank refused, Feeding America would judge this food bank as having lower need and push it down the priority list. Unsurprisingly, food banks went out of their way to avoid refusing food loads — even if they were already stocked with that particular food.

This Soviet-style system was hugely inefficient. Some urban food banks had great access to local food donations and often ended up with a surplus of food. A lot of food rotted in places where it was not needed, while many shelves in other food banks stood empty. Feeding America simply knew too little about what their food banks needed on a given day.

In 2005, however, a group of Chicago academics, including economists, worked with Feeding America to redesign the system using market principles. Today Feeding America no longer sends trucks of potatoes to food banks in Idaho and a pound of chicken is no longer treated the same as a pound of french fries. Instead food banks bid on food deliveries and the market discovers the internal market-prices that clear the system. The auction system even allows negative prices so that food banks can be “paid” to pick up food that is not highly desired–this helps Feeding America keep both its donors and donees happy.

Food banks are not bidding in dollars, however, but in a new, internal currency called shares.

Every day, each food bank is allocated a pot of fiat currency called “shares.” Food banks in areas with bigger populations and more poverty receive larger numbers of shares. Twice a day, they can use their shares to bid online on any of the 30 to 40 truckloads of food that were donated directly to Feeding America. The winners of the auction pay for the truckloads with their shares. Then, all the shares spent on a particular day are reallocated back to food banks at midnight. That means that food banks that did not spend their shares on a particular day would end up with more shares and thus a greater ability to bid the next day. In this way, the system has built-in fairness: If a large food bank could afford to spend a fortune on a truck of frozen chicken, its shares would show up on the balance of smaller food banks the next day. Moreover, neighboring food banks can now team up to bid jointly to reduce their transport costs.

Initially, there was plenty of resistance. As one food bank director told Canice Prendergast, an economist advising Feeding America, “I am a socialist. That’s why I run a food bank. I don’t believe in markets. I’m not saying I won’t listen, but I am against this.” But the Chicago economists managed to design a market that worked even for participants who did not believe in it. Within half a year of the auction system being introduced, 97 percent of food banks won at least one load, and the amount of food allocated from Feeding America’s headquarters rose by over 35 percent, to the delight of volunteers and donors.

Teytelboym’s very good, short account is working off a longer, more detailed paper by Canice Prendergast, The Allocation of Food to Food Banks.

Canice’s paper would be a great teaching tool in an intermediate or graduate micro economics class. Pair it with Hayek’s The Use of Knowledge in Society. Under the earlier centralized system, Feeding America didn’t know when a food bank was out of refrigerator space or which food banks had hot dogs but wanted hot dog buns and which the reverse–under the market system this information, which Hayek called “knowledge of the particular circumstances of time and place” is used and as a result less food is wasted and the food is used to satisfy more urgent needs.

The Feeding America auction system is also the best illustration that I know of the second fundamental theorem of welfare economics.

Even monetary economics comes into play. Feeding America created a new currency and thus had to deal with the problem of the aggregate money supply. How should the supply of shares be determined so that relative prices were free to change but the price level would remain relatively stable? How could the baby-sitting co-op problem be avoided? Scott Sumner will be disappointed to learn that they choose pound targeting rather than nominal-pound targeting but some of the key issues of monetary economics are present even in this simple economy."

Some statistics on poverty are dramatically overstated because of flawed survey data.

Our poverty data may be completely wrong by Angela Rachidi of AEI.

"According to the study, by University of Chicago researchers Bruce Meyer and Nikolas Mittag, survey respondents in deep poverty reported only 52 percent of government resources they received.

Considering all people in poverty, survey data captured only 46 percent of government assistance. The implication was that poverty researchers — who often recalculate the poverty rate to include income from programs that the official metric ignores — have been reporting bad numbers. Using this type of measure, with the thresholds from the official metric but more safety-net income included, single-mother households had a poverty rate of 30.2 percent using the survey data, but only 19.2 percent once underreporting was accounted for.

A much smaller percentage of single mothers were also found to “fall through the cracks” completely when factoring in underreporting. Past research suggests that roughly 20 percent of single mothers had no earnings and no income from cash welfare, suggesting that government programs were failing them. But Meyer and Mittag found that relying on survey data overstated the percentage of these “disconnected” single mothers by one-third.

The researchers discovered this phenomenon by looking at data from New York State, comparing what individuals told the Census’s Current Population Survey with data from state agencies indicating what they actually received in cash, food, housing, and other benefits. Based on their analysis, the authors believe that the results are applicable outside of New York State, and that the data flaws are likely consistent across most household surveys.

These results require that we reassess our view of the poor and the programs designed to serve them. An analysis in the recent book $2 a Day: Living on Almost Nothing In America, by Kathryn Edin and Luke Shaefer, found that 1.5 million households were living on less than $2 in cash a day in 2011 — a number that almost doubled since welfare reform in 1996. They argued that TANF, the government’s safety net of last resort, was dead. But is that number real? The work by Meyer and Mittag suggests it is likely not."

Selective Reporting and the Social Cost of Carbon

Here is the link. Here is the abstract:

"We examine potential selective reporting in the literature on the social cost of carbon (SCC) by conducting a meta-analysis of 809 estimates of the SCC reported in 101 studies. Our results indicate that estimates for which the 95% confidence interval includes zero are less likely to be reported than estimates excluding negative values of the SCC, which might create an upward bias in the literature. The evidence for selective reporting is stronger for studies published in peer-reviewed journals than for unpublished papers. We show that the findings are not driven by the asymmetry of the confidence intervals surrounding the SCC and are robust to controlling for various characteristics of study design and to alternative definitions of confidence intervals. Our estimates of the mean reported SCC corrected for the selective reporting bias are imprecise and range between USD 0 and 130 per ton of carbon at 2010 prices for emission year 2015."

Gains Of Antarctic Ice Sheet Greater Than Losses: NASA Study

Click here to read the article Alyssa Navarro of TECH TIMES. The researchers do worry that in the future the losses might start to outweigh the gains. But at least for now, things are not getting worse. Excerpts:

"A recent study conducted by NASA reveals that the mass gains of Antarctic ice sheet are enough to outweigh the increasing losses in the region's diminishing glaciers.

The new data offers previously unrecorded gains in Antarctica, scientists say, but it challenges the conclusions of other reports such as the 2013 Intergovernmental Panel on Climate Change (IPCC) study. The IPCC's earlier report said that the continent is continuously losing land ice.

According to the new NASA research published in the Journal of Glaciology, the Antarctic ice sheet accumulated a net gain of 112 billion tons of ice per year in the period covering 1992 to 2001, but it decelerated to 82 billion tons of ice per year in the 2003 to 2008 period."

"Researchers also found that the thickening of ice in the eastern region of Antarctica has remained steady from 1992 to 2008 at 200 billion tons per year, while the losses in the western region as well as in the Antarctic Peninsula skyrocketed to 65 billion tons per year."

Is The New York Times Right That "The only time in the past four decades when after-inflation wages bounded upward was from 1998 to 2001, when the jobless rate fell below 4.5 percent."

See The Mystery of the Vanishing Pay Raise by STEVEN GREENHOUSE. That implies that the gain in wages was greater than the CPI increase in only 3 or 4 years. But I found 17 years when that happened from 1976-2009 (the BLS file I found that had annual wages only went up through 2009). That means there were 17 years when it was the opposite.

I calculated the average annual increase in hourly wages and compared that to the increase in the average CPI each year. The table below shows the annual percentage change in both wages and prices. Wages outpaced inflation every year from 1996-2003. Links to my data sources are after the table.

The three worst years for workers were 1979-81, when the inflation rate was 3.48, 5.46 and 1.69 percentage points higher than the increase in average hourly earnings. In 2009, wages were 2.36 times higher than they were in 1982. The CPI was 2.22 times higher. So going back to 1975 brings in those really bad years for workers when we had very high inflation rates (from 1979-81 those rates were 11.3%, 13.5%, and 10.3%).




Data on wages

CPI data