gender

Trouble with definitions

AustralianActuary Business

If you can’t define what a woman is, how can you define “gender pay gap”?

I’m going to hazard a guess here: those acquaintances of yours who claim that there is a gender pay gap in Australia will be unable to define a woman when asked. You try it out for yourself.

There are two ways of defining gender pay gap. One is correct and the other isn’t. The incorrect way is to add up total earnings of men and women separately then divide by the total number of men and women respectively and compare the two answers. They will be different. That allows the unscrupulous and the unthinking to cry “gender pay gap!” very loudly. Just like how today’s story in The Age reports.

However, the above calculations merely represent average earnings of men and women. Nothing can be inferred about whether men and women are paid equally by looking at averages.

The correct way to test for a gender pay gap is to look at pay for equivalent work. Then you will find that Australian business does not pay different rates for men vs women.

Gender quotas and corporate performance

AustralianActuary Business ,

I think quotas of any sort are inherently wrong and likely to be bad for corporate performance. In recent times, many of those in favour of quotas have shifted their claims from “quotas are necessary to treat under-represented groups fairly”, to “quotas are good for business performance.” It is not easy to prove or disprove such claims.

Conceptually, the skills needed to perform well in business are not held in exclusively in the domain of any particular group of people. Those skills are held by all different sorts of people. And plenty of people do not have the necessary skills. Consequently, the best corporate performance will emerge from the companies with the best collection of people with those skills, regardless of who they are or where they came from.

Adding a degree of empirical research to the debate, the authors of a study conducted in Norway and published last month (accessible here), considered corporate performance controlling for gender composition of the board. Among the conclusions was this:

“Analyzing the causal effects of the Norwegian gender-balancing quota, we find the quota significantly increases the share of women directors on the boards of treated firms. Further, we find the quota significantly adversely affects the performance of treated firms and firm risk is significantly reduced.”

That is, if the law imposes quotas on gender balance, gender balance will improve. (No surprises there.) Also, firm risk reduces. Finally, corporate performance is significantly adversely affected.

Corporate performance changes as a result of gender quotas. Lower performance and lower risk is not the same as improved performance with no increase in risk.