Women’s Economic Progress and the Legacy of Patriarchy

 The contributor to The Economist under the label “Free Exchange” provided an interesting column on the economic progress women have made: Do “greedy jobs” cause the gender pay gap?  The author discusses the conclusions provided in a recent book.

“A new book by Claudia Goldin of Harvard University, an expert on women and work, is a study both of American women’s choices and of the context in which they are made. “Career and Family: Women’s Century-Long Journey Toward Equity” traces the history of work and family for college-educated women, and diagnoses what still troubles their careers today.”

Goldin is said to provide a standard description of the evolution over time of working women from single women working in female specific jobs, to unmarried women gaining advanced education and access to traditionally male positions until marriage, to women trying to combine both careers and family.  All the while, the women would be underpaid for their efforts.

“Yet, despite the staggering extent of the change Ms Goldin documents, a clear gender gap still exists for these women, most notably with respect to pay. American women earn on average 20% less per hour worked. For college graduates, the gap is larger, at 26%.”

“It is at this point that the book becomes provocative. Drawing on reams of research Ms Goldin argues that most women no longer suffer much labour-market discrimination in the sense of unequal pay for equal performance, as is often claimed by the left. Nor is the gender pay gap driven primarily by women’s choice of occupation, an explanation sometimes favoured by the right.”

“The most important cause is that women curtail their careers as a part of a rational household response to labour markets, which generously reward anyone, male or female, who is willing to hold down what Ms Goldin calls a “greedy job”. These are roles, such as those in law, accountancy and finance, that demand long and unpredictable hours. Parents need somebody to be on-call at home in case a child falls ill and needs picking up from school, or needs cheering on at a concert or football match. That is incompatible with a greedy job, which requires being available for last-minute demands from a client or boss. No one person can do both. The rational response is for one parent to specialise in lucrative greedy work, and for the other—typically the mother—to prioritise the children. Ms Goldin writes that ‘couple equity has been, and will continue to be, jettisoned for increased family income’.”

This conclusion pertaining to women’s progress requires comment, not because it is incorrect, but because it demonstrates so much that yet needs to change.  First of all, why do we even have these “greedy” jobs?  The author states “those in law, accountancy and finance, that demand long and unpredictable hours.”  These occupations do not demand long and unpredictable hours, it is their social cultures that have developed these conditions.  They all involve interacting with money or people who have money—lots of it.  If money is to flow or be protected, a system has been set up whereby these people must be dealt with.  They are not unlike the gangs of crooks who would take control of a river or highway and demand a fee for passage in days of old.  They seem so ashamed of the fact that they contribute so little yet make so much money that they create this myth that what they do requires such extreme intelligence and hard work that only a few of the “elite” can possibly succeed.  Part of the support for this myth is claiming that a woman raising children and needing well-defined working hours—usually with a husband who is nearly useless—can’t compete.  It is all a scam of epic proportions that needs to collapse.

In Are Men Becoming the Second Sex?, it was noted that women compete quite well with men in education where success demands “long and unpredictable hours” and can be measured quantitatively.  Women have long out-competed men for college bachelor degrees and now produce most of the advanced masters and doctoral degrees.  Women are taking control of the cadre of young medical doctors and have begun to surpass men in law degrees.  Where they are less likely to succeed are in activities that are controlled by cultural factors such as politics and the high-income aristocracy where patriarchal attitudes remain dominant.

There are many men, often with significant power and influence, who do not wish to compete with women.  They are much more comfortable relegating them to household chores, an attitude that has thousands of years of cultural/religious support.  Is there a better way to drive women out of the workforce than to deny them any support when they inevitably get pregnant and must stop work and attend to the newborn?  After a few months, the mother and infant have bonded, and the infant can just as well be cared for by the father.  In fact, the infant and family would be in better shape if the father took the time to form a strong bond with the child as well.  If one believes that men and women have equivalent cognitive capabilities on average, why is the default solution that the mother should drop her career so the father can maximize family income.  Why is that not a decision reached on the basis of each parent’s capabilities and prospects.  The idea that women should focus on childcaring is a social construct imposed by tradition.  Tradition can be changed.

The Nordic countries were never much influenced by Christian traditions.  Consequently, they seem to be the firmest believers in equality of opportunity for women.  In Scandinavia and Gender Equality Sweden was used as an example of the extent to which a society can go to provide gender equality.  The Swedish government’s goal is thusly defined. 

“The aim of Sweden’s gender equality policies is to ensure that women and men enjoy the same opportunities, rights and obligations in all areas of life.”

Note the inclusion of the phrase “equality of obligations.”  Sweden interprets this to mean that women must not bear the only burden of raising a child.  When a woman has a baby, she is not offered maternal leave, but a very generous family leave of over a year in extent.  This leave can be taken as needed over the first several years of the child’s life.  The reason for calling this family leave is because it is designed to balance the time a mother will spend away from work with the requirement that the father also miss work—a minimum of two months—and spend time providing the childcare.  The policy is aimed at fairness in sharing obligations and intends to protect any new mother from having to leave the workforce unless she wishes to do so.

Patriarchy is a tradition that needs to die.

 

Pensions and Pension Plans: The Guaranteed Retirement Account

 Experts claim that if a retiree can maintain an income that is 70% of the preretirement income, then the individual will be able to maintain the preretirement lifestyle.  People who survive but struggle will continue in the same mode, those who were living the good life should be able to continue living the good life.  Sources of retirement income include Social Security payments.  This system was never intended to be a full retirement program; it was intended to keep the elderly out of abject poverty.  Benefits are focused on providing the greatest assistance to low-wage workers.  As income increases, the benefits from the program become a smaller fraction of that desired 70%.  Those with moderate to high incomes now need either an employer provided defined benefit plan, an employer provided defined contribution plan, a healthy personal savings accumulation, or some combination of the three.

A defined benefit pension plan was once common for employees of large companies.  With the ascendency of neoliberal concepts and the acceptance of the dubious claim that a company’s only responsibility was to provide the greatest profit for the benefit of shareholders, defined benefit plans began to disappear and be replaced by defined contribution plans such as 401(k)s.  This was a massive transfer of risk from companies to their employees.  As points out Max Reyes in a Bloomberg Businessweek article, Companies Decide the Time Is Right to Offload Pensions to Insurers, a perverse outcome of the pandemic was that the suffering was born by mostly low-income individuals, while investors were able to dramatically increase their wealth.  Pension plans are major investors and they have performed quite well.

“The hundred largest corporate pensions were funded at 97.1% in August [2021], according to the consultant Milliman Inc., and they could creep as high as 102% by the end of the year under optimistic projections.  A year ago, pensions were less than 87% funded.”

Being underfunded means the plans did not have the projected resources to meet their projected obligations.  The companies would be at risk of having to default in some manner in the future or extract large sums of money from their businesses.  Now that they are at or near full funding, they have a convenient mechanism for terminating their defined benefit plans entirely and eliminating the potential for risk to return in the future—without having to contribute any of their profits.  The path forward is called a pension risk transfer or PRT.

“…By buying a financial product called an annuity, a company can essentially place the assets of a plan and the responsibility for paying for it into the hands of a life insurance company. The insurer makes money if it can earn more from investing the assets than it has to pay out. (Another risk-transfer option is to offer to pay benefits in a lump sum; in that case, the risk of ensuring the money lasts is taken on by the pensioner rather than another company.) These deals with insurers aren’t new, but record high markets are making them especially attractive to employers.”

Major companies have recently opted to take this path and many more are expected to follow.

“A recent study commissioned by MetLife found that 93% of 250 plan sponsors surveyed intend to divest all of their obligations, up from 76% in 2019. Companies can choose to fully divest the plans or reduce the scope of pensions on their balance sheets without removing them entirely. But plenty of businesses are looking to get out for good, according to Yanela Frias, president of Prudential’s group insurance business. ‘The reality is that an insurance company is much better positioned to manage this liability than a car manufacturer or a telephone company,’ Frias says. ‘We do this for a living’.”

This trend protects the pension rights of employees and is revenue neutral for retirees and nearly so for those close to retirement.  However, for younger employees and new hires they will be pretty much on their own in saving for retirement, managing their savings, and making sure they don’t outlast their savings in retirement. 

This trend of divesting pensions will hopefully generate serious consideration of what is really needed: a national retirement that is not dependent on the whims of employers with mandatory participation by both employers and employees.  Teresa Ghilarducci has for years been promoting a Guaranteed Retirement Account (GRA).  She and Tony James provided a detailed account of their proposed GRA in Rescuing Retirement: A Plan to Guarantee Retirement Security for All Americans.  If implemented throughout employees’ working lifetimes and earning returns consistent with those of existing public employee pension plans, the cost to individuals and companies is surprisingly small. 

The authors begin with some perspective on why their plan is necessary.

“As recently as 1979, half of all private sector workers with retirement plans had traditional, employer-administered pensions.”

“Today, however, only 15 percent of the U.S. workforce (mostly government workers and public school teachers) has access to a traditional pension.  Beginning in the 1980s, most private employers shifted to ‘defined contribution plans such as 401(k)s, which cost companies less and shift funding risk rom companies to employees.  Roughly half of private sector workers (53% in 2016) either lack access to any plan or do not participate in one.”

Most employers offer only modest contributions to 401(k)s, usually matching workers’ contributions up to a few percent of wages.  Most workers have endured nearly stagnant wages over the last several decades, leaving little opportunity to lock up precious earnings in a long-term effort to prepare for retirement.  As a result, most workers, particularly those with low wages, will have little other than Social Security available when they hit retirement age.

“The World Economic Forum (WEF) estimates that the United States had a $28 trillion retirement savings gap in 2015—the largest in the world.  By 2050, they project this will grow to $137 trillion.  This is almost a $3 trillion annual increase—five times the annual defense budget.”

The goal of the GRA is to fill the gap between what Social Security provides and the desired 70% of preretirement income.  The intention is to provide that amount for workers earning less than $100,000 per year.  Those with higher incomes will still benefit but should be able to provide some additional savings for retirement.  The basic plan is simplicity itself.  Every worker, from the time of first employment to the full Social Security retirement age of 67 is assumed to contribute 1.5% of their income to a retirement account.  Employers are required to match that amount.  There is also a $600 annual tax credit for individuals making the participation of lowest wage workers nearly free.  This 3% annual contribution invested in a long-term investment plan is to be converted to an annuity at retirement that will provide a constant source of income for the remainder of their lives.  

At the historical rates of return for these types of pension funds, the GRA is expected to produce about 38% of preretirement income for all participants.  This will augment the amount provided by Social Security (SS).  The authors provide these quantities: for an income of $22,021, SS provides 53% + 38% = 91%; for an income of $48,937, SS 40% +38% = 78%; for $78,295 SS 33% + 38 = 71%; for $127,500, SS 26% +38% = 64%.

The authors assume the money invested will earn 6-7% over a lifetime.  This is consistent with past performance for defined benefit plans, of which public employee plans seem to perform the best.  Historically, defined contribution plans have poorer performance in terms of return on investment.  Whether the economy in 40 years will be anything like the economy over the last 40 years is an open question.  However, being able to accomplish so much with such a small level of investment, this type of GRA provides a platform for modifications in the future as needs arise.  

The plan is designed to work for young people who will contribute all their working careers.  Those who are approaching retirement with little in savings will at least have the opportunity to invest more in the GRA than the 3% to hasten the buildup of benefits, but the main recourse seems to be to work longer to buy more time and to boost Social Security benefits.

The universality of the approach frees the individual from a dependence on the employer for retirement benefits.  Just as a good healthcare plan provided by a company can induce individuals to make unwise economic decisions based on the fear of losing that level of coverage by choosing another job, a good company pension can provide a similar constraint.  The GRA continues wherever the worker goes.  This should make life simpler for both employees and employers.

 

Rainy Day History: How the South Emerged from the Civil War with More Political Power Than Ever

The red states, mostly in the South, have created much political angst as they impose ever tighter voting conditions in an attempt to limit the number of voters.  It is well understood why they wish to do this.  What is perhaps less clear is how important control of access to polling booths within the electoral system has been throughout the history of the southern states.

When our nation was formed, representation in the House of Congress would be proportional to the population of each state.  The southern states’ populations were composed largely of slaves who were not considered citizens eligible to vote, yet these states needed the total population count in order to have the political influence they thought they deserved.  A compromise was reached in which it was allowed for each slave to be considered three-fifths of a person in allocating representatives.  As a result of the Civil War and the constitutional amendments enacted, the former slaves had to be treated as full citizens and provided the right to vote.  In effect, the freeing of the slaves would change the three-fifths rule to the five-fifths rule.  In terms of representation, the southern states would receive extra house members—to the losers went the spoils.

This situation would be optimized, in the southerners’ view, if the former slaves were not allowed to vote, providing more seats, yet with total control over who manned those seats.  It took a few years and a friendly Supreme Court, but soon southern blacks were nearly totally disenfranchised, and the south would comfortably remain a one-party region.

States with a dominant party gain nothing from encouraging voter turnout as long as the players in the scheme show up to vote.  The differences between numbers of voters and representation in congress of the voters became startlingly large.  Alexander Keyssar recently wrote a book titled Why Do We Still Have the Electoral College?  He points out that for all our history the method of electing a president was universally viewed as defective and dangerous.  However, there were always enough states or a political party that had an advantage from the electoral system and refused to give up that short-term gain for long-term stability.  Ultimately, the most popular proposed amendment was to replace the Electoral College with direct election of the president by a nationwide vote, something the southern states would never allow.

Keyssar provides some data on the imbalance caused by the electoral system.

“In 1904, for example, Delaware had cast roughly the same number of votes for Congress as Georgia had. But Georgia had eleven representatives while Delaware had only one.  Ohio that same year cast as many votes for president as nine southern states together, but those nine states possessed ninety-nine electoral votes in comparison to Ohio’s twenty-three.  (The 1904 election was no anomaly: in every presidential contest from the 1890s into the 1960s, there were many fewer ballots cast per electoral vote in the South than elsewhere.)”

“…the Electoral College reinforced white supremacy in the South and gave southern Democrats unmerited strength in national elections.”

The South would use this unmerited strength to forbid any attempt to make lynching a crime, eliminate most of the black population from the Social Security System, and ensure that the postwar G.I. Bill would effectively become affirmative action for whites.  The southern Democrats would eventually become mainstream Republicans and continue pursuing minority party rule and white dominance.  The culture persists; the methods are little changed.