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The Correct Question To Ask About The Google, DoL, Spat Over Gender Inequality In Pay

Tim Worstall
This article is more than 3 years old.

That men and women--and those of varying melanin content, chat up targets on a date and so on--get paid the same amount for doing the same job is the law. Those violating said law should, of course, be rooted out and punished. If for no other reason than we are a society which wishes to be ruled by the law and thus we must all obey it. However, gender inequality in pay is one of those things which is terribly hard to determine as something which is actually breaking said law.

In economic terms we differentiate between taste discrimination and rational discrimination. If, for example, Google were to hire me--as a result of perhaps some unfortunate brain spasm somewhere in the system for it wouldn't be rational for them to do so--then they would pay me rather less than their engineers, there would thus be a pay gap between myself and their female engineers. This is because the sort of thing that I do, economic scribbling, pays rather less in our society than the high level coding my nephew is good at (yes, disclosure, I have a nephew working for Google). That's entirely rational discrimination.

Taste discrimination, simply paying people less because they are female, non-white, gay, transgender or whatever is both illegal and also an extremely bad business idea as Gary Becker pointed out. If such are generally discriminated against then that makes their wages lower all around and if their talent is indeed equal then that means a competitor can scoop up cheap talent and make a fortune. And there's no doubt that such discrimination did exist in the past as we've the example of someone who did that scooping and made a fortune, Dame Steve Shirley.

But this always gives us a problem. If we see pay inequity then how do we know which of these two it is? It isn't true that just because the average woman in a company gets paid less than the average man that therefore women doing the same job are being paid less than a man. A modern corporation pays different amounts for different skills after all, and if there's a gender disproportion in who has the skills then a gender pay difference might be entirely rational, it might not be.

At which point we come to this spat between Google and the Department of Labor over the existence or not of a gender pay gap at the company. If it's a rational piece of discrimination then that should be fine, if it's taste discrimination then it won't be.

Once a salary is calculated by analysts — who Google says have no access to the gender information of the employee in question — it’s then fed into the company’s pay equity model. This is a four-stage process that compares suggested compensation amounts between genders, and theoretically prods the company to make adjustments if any statistical gap is observed.

Well, they're certainly trying hard, we should perhaps give them that. And there's also that point about maternity leave from a little while back. Googlers are engineers so they do tend to study the data. They found that the limited maternity leave they offered led to all too many new mothers quitting the company. Talent is rare and expensive--so, they tried extending that length of maternity leave. Retention rates rose to 50%. As I say, they do at least try on these sorts of issues:

But Google’s methodology for calculating employee compensation is not “gender blind,” as it cringingly asserts. According to the blog post, employee compensation is suggested by a number of factors, including “current and recent performance ratings.” Although salary is calculated by analysts who can’t see employee gender, they factor in performance ratings which themselves are subjective and shaped by biases.

As a purely personal opinion I tend to think that's a bit of a stretch myself. But there is I think a simple method of testing these two claims. DoL says there's a large gender pay gap, Google says there isn't. And my very strong suspicion is that the two sides are using different definitions, as I've said before:

When we move the goalposts a bit and start talking about similar jobs then, well, then it's all different, isn't it? Is an HR manager doing the same job as a programming manager? No, obviously not--but are they doing a similar job? How about a programming manager in some difficult and recondite skill that must be mastered before one can become a manager, as opposed to a programming manager overlooking a Javascript team? Is that the same or similar job? All of which is really where this disagreement is coming from.

Google is using a strict definition of "same job" to find no gender pay gap. The Department of Labor is using a looser definition of "similar job" to find that there is one.

Obviously this is an opinion, nothing more, no one actually has enough data to be able to decide one way or the other. But there is one simple question that could be asked of the DoL to bring much clarity to this. As Google says of their own pay audit:

In late 2016, we performed our most recent analysis across 52 different, major job categories, and found no gender pay gap.

How many job categories is the DoL looking across? If they're looking across 5 or 10 perhaps then that might well be the explanation, they're looking at the data in too coarse grained a fashion. What they're claiming to be taste discrimination is simply--or at least could be--rational discrimination happening at a greater level of detail than their calculations are taking account of. Of course, if they're using 52 different job descriptions then my surmise is rubbish, isn't it?

And yes, of course, I have asked DoL and they're saying nothing as this is all still in court.

