Capitalism is the cure for discrimination

The public sector is the worst offender for the gender pay gap, according to new statistics

All statistics should be taken with a pinch of salt; but when it comes to the gender pay gap, a fistful is in order. This is a measure of the difference between what men and women earn on average for each hour they work, and thanks to numerous equality campaigns wielding variously manipulated calculations, you can find almost any figure to suit your agenda. This year’s Equal Pay Day campaign, for example, even conveniently left the one major region with a pay gap in favour of women – Northern Ireland – out of its report, presumably to justify its conclusion that all of us are discriminated against and oppressed.

Thankfully, the Office for National Statistics provides some sober analysis amid the inflated figures and victimhood propaganda. And its new gender pay gap calculations produced some surprising results. The worst performers weren’t greedy capitalists or discriminatory private sector employers. They were in the part of the economy that is regularly held up as an emblem of fairness and equality: the public sector.

While women working part-time in the private sector now earn 2.6 per cent more than men (up from 2.2 per cent less in 1997), in the public sector the gap has widened dramatically (from 6.1 per cent less to 22.3 per cent less). In the private sector, meanwhile, full-time female workers earn 15.9 per cent less than men. That’s down nearly 10 points since 1997. By contrast the gap has closed by less than 1 point in the public sector.

There are reasons to be hesitant about drawing definitive conclusions from a single set of statistics, particularly as there are discrepancies between them and other analysis the ONS has conducted.

And, like most pay gap analysis, it doesn’t compare like with like. You have to control for the different jobs men and women tend to do, their relative education levels, and their backgrounds to establish whether discrimination is at play.

Nevertheless, they reveal an important truth about the best means of delivering a fairer society. It’s not through wage-setting by the government – which is patently unable to put its own house in order. It’s capitalism, competition and market forces. Why?

Liberal markets and capitalism rarely allow for discrimination based on anything but merit. If you don’t hire the best people available, your company cannot be competitive with rivals in the market who do. To put a strange preference for gender or race ahead of pure talent creates a crucial and unnecessary disadvantage, especially in an age where the quality of your workforce is increasingly important.

But discrimination is fundamentally unprofitable in other ways, too. Customers will hold companies accountable for unsavoury hiring or firing policies: intolerance towards people based on sex or race is recipe for an onslaught of bad press and boycotts. Social media has demolished the cost of exposing poor behaviour to the wider public.

And if we want to improve working conditions for women even further, the evidence suggests we need more competition and capitalism not less. An important study by the OECD found that in liberal markets where it is easier both for entrepreneurs to start new companies and for bad firms to fail, the gender pay gap is lower for all the reasons set out above.

However badly the public sector fails, in contrast, there is nearly zero risk any of its agencies will be put out of business by customers unhappy at its practices.

It would be bordering on conspiracy theory to suggest that the public sector is indulging in mass discrimination. Most public servants are doing their best to promote talent and tolerance.

But just as it was operating in a vibrant, free market that gave entrepreneurs the incentives to create some of the labour-saving devices that liberated so many women from drudgery, it is competition that is demolishing the barriers to women flourishing in their careers.

Regardless of which pay gap statistic you accept or reject, there is no denying the role of capitalism in women’s workplace liberation.