Price-fixing In The Name Of Equality
'OTTAWA, 1999 -- A federal agricultural tribunal today compensated Canada's dairy farmers for years of underpricing of milk. The tribunal found cow's milk has for decades been priced more cheaply than goat's milk, notwithstanding that both are equally high in vitamins and minerals. Under the newly established principle of 'equal prices for food of equal nutritional value,' the tribunal awarded the dairy farmers $ 4 billion in compensation.'
The federal government is anxiously lofting trial balloons about possibly appealing a human rights tribunal's decision to award female government employees between $ 1 billion and $ 5 billion in compensation for years of alleged underpayment for their services. We are so inured to the huge sums they toss around in Ottawa that most of us have no sense of how much money $ 5 billion really is. Put it this way: $ 5 billion is the annual difference between a 7% and a 5% goods and services tax. Put it another way: to raise $ 5 billion, Ottawa would have to increase everyone's income tax rate by 1.5 percentage points. We're talking about big money.
Apologists for the human rights tribunal argue money is less important than rights and principles -- especially the principle, which we have enshrined in law, that people should be paid equally for work of equal value. But is that principle really at stake in the federal pay equity case?
It needs to be said as plainly and bluntly as possible: pay equity is a hoax. The method used to calculate 'work of equal value' may involve masses of statistics and complex equations. So does astrology. Astrology is still a fraud, and so is pay equity.
The premise of all pay equity schemes is that something -- in this case, labor, but in principle, goat's milk, automobiles, shoes -- can have a 'value' independent of its price. A job, they say, can pay $ 24,000 a year, but really be worth $ 26,500. Now it's true that when we speak, we will sometimes talk about work being 'undervalued,' much as we will say 'our heart is broken' when we are disappointed. But just as heart surgeons don't take the latter metaphor literally, economists should not be fooled by the former.
People who work for a living are not helpless, pathetic rag dolls. They are shrewd valuators of their pay and prospects. They know what they can do and they know what their skills can earn. If an employer tries to pay them less than they can get elsewhere, they quit. And 'elsewhere' does not mean just across the street: it means around the world. Carpenters will drive from Moncton, N.B., to Vancouver to find opportunity; university graduates flee Montreal for Toronto three days after graduation; restless young people in Winnipeg slip illegally across the border to work as waiters in Chicago.
When a worker decides to stay put, it's also usually for good reasons. Maybe not reasons that would seem good to somebody else, but reasons that are good to her. Of course she would like to earn more. Who wouldn't? But the fact is, when she offered her services on the open market, the job she accepted was the one that offered what she regarded as the best combination of pay, satisfaction, opportunities, security and benefits. Her pay was set the same way as the price of goat's milk: by accepting the best offer.
If someone now wants to come along and say that accepting the best offer is not a valid way of setting wages, the rest of us need to understand the full implications of that. What the pay equity people are proposing is not a little tinkering with wages in the name of equality. What they are proposing is the rejection of the very core of the market mechanism. If the market is 'wrong' about wages, there is no reason to think it is 'right' about anything else. If government bureaucrats can make Canada 'fairer' by tossing out market wages and substituting a number they have made up in their own minds, then they can make Canada 'fairer' by rejigging the price of houses, grapefruit and computer software in the same way.
But the market is not wrong and bureaucrats cannot fairly set prices. 'Equal pay for work of equal value' is gibberish. The plaintiffs in the pay equity case are not entitled to a nickel. Yes, Ottawa should appeal. But first it must amend its own laws to make clear that in Canada, the promise of non-discrimination will not be perverted into an open door to socialism by stealth.
Originally published in The Financial Post