Can Wage Transparency Fix the Pay Gap?
Will wage transparency reduce or eliminate the pay gap between men and women?
Yes and no.
Let’s take the no side first. Wage transparency will not reduce or eliminate this pay gap because it emanates from real differences in productivity (actually discounted marginal revenue productivity, but we’re going to keep it simple, here). That is to say, there is an economic law that maintains that wages tend to reflect productivity. What is productivity? That is the amount by which you increase your employer’s bottom line for every hour you are on the assembly line, or shop floor, or driving a truck or pecking away at a computer at your desk.
Suppose that your productivity is $20 per hour. Any other wage apart from that is unsustainable, at least in the long run. If you are being paid $30 hourly, your employer is losing $10 per hour by hiring you. If this practice of his is widespread, he will tend to go bankrupt. If your pay is $15, he is profiting from your labor to the tune of $5 per hour. This, too, will not and cannot last. Just as nature abhors a vacuum, the economy abjures a profit: some other employer will offer you $16, since he can then earn a $4 profit from your work, another will up this to $17, with the intention of “exploiti
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