Re: Bigger salaries for men
by
Kea
05/16/2008, 12:05 AM #
The "no discussing pay" policy that many companies have is an example of what economists call "price discrimination".
It's like how a catalogue can advertise the exact same hair trimmer one one page for humans, and on another page for pets, and sell the supposedly human hair trimmer for more.
Or how supermarkets sell the prepackaged mushrooms for twice as much as the loose ones by weight.
Or how online retailers charge people different prices based on their previous purchase history. A customer with a record of buying expensive items gets charged more for the same book or CD as a customer with a record of being a bargain hunter.
It is beneficial for companies to price discriminate because in the end they make more money. If they set the prices of their products uniformly high, they would scare off the bargain hunters. But if they set them uniformly low, they would miss out on customers who are willing to pay more. So they try to let each customer (roughly) set their own price.
Price discrimination relies on 2 things:
1. Giving people an opportunity to reveal that they're wiling to pay more for what is essentially the same thing.
2. Maintaining an environment of imperfect information. The supermarket puts the packaged mushrooms on the other side of the store as the loose ones, hoping that most people won't bother to compare. The online retailer charging different prices relies on it being unlikely that different customers tell each other what they paid for the same thing. (With Amazon.com, when people finally caught on, they complained, and the company had to end the policy.)
Likewise, the company allows employees to reveal that they are willing to be paid less in initial interviews, and then makes a policy that hinders them from getting information about what other people make. So if on average, women are psychologically more risk-averse and are shyer about negotiating their wages, they will end up being paid less than men. They have been put in an environment in which it is easy to price-discriminate against themselves.
And that is also incidentally why the workings of the free market won't smooth out the pay disparity on its own.