The welfare state already solves that gender pay gap

Society is having a little bit of a wail about the gender pay gap at present, as we've all noted. That it is, as we've been saying for years now, a result of the different decisions that people make when children arrive is being overlooked. That's not all that is being overlooked though. For there's a very strong argument that we already compensate for whatever gap in pay there may be. That compensating system being what we call the welfare state.

Take this from the Fawcett Society:

“These figures show us what we expected – we still see an underrepresentation of women at the top and and overrepresentation at the bottom,” said Sam Smethers, chief executive of the Fawcett Society. “The public sector matters for women because it is women who are overwhelmingly dependent on public services, so getting women into decision-making positions is key.”

Note what the statement is. Men earn more than women. This means, in a progressive tax system, that men pay more tax than women. We've also got that insistence there that the welfare state spends more of that tax money upon women and their interests.

We seem thus to already have a remediation system for that unfairness - perceived as such by some at least - of that lower pay. Sure, we don't know whether that balancing is exact, it might even be too much. That just means we should go and find out the extent once we've accepted the principle.

But this does then give us two options for action. The first is to insist that we're balancing and thus no more need be done. Or, if we regard equal earnings as being of paramount importance, we can strive toward that. And as we gain it we should therefore be reducing the welfare state, that thing which currently balances the unfairness we're abolishing.

Sir Simon, markets work better than nationalisation

Simon Jenkins has the solution for all those churches rotting away across our green and pleasant land. We should nationalise them.

This is the wrong solution:

Nothing will change unless everything changes, and it is clear that everything should. Otherwise most churches will eventually become like England’s castles: ruined echoes of a distant past. Church buildings should be “renationalised”, taken into state ownership, and then transferred to local parish or town councils. They might in turn set up local trusts. These secular bodies would be responsible for subletting churches for community use, which would of course include for Christian worship in whole or part. All denominations would be encouraged to cohabit.

We agree that there are churches rotting away in every corner of our isles. But nationalisation isn't the correct solution for it will rule out entirely what might come to be part of that correct solution - not having the buildings which were formerly churches. Or, to be perhaps less extreme, not having them with those community uses but becoming private.

Nationalisation would petrify the buildings into uses which might no longer be appropriate. At the extreme end it could be, it is possible at least, that here is no community use which anyone has for some of these buildings. Certainly, a goodly part of the complaint is that no one has a use which covers the costs of maintaining those buildings. At which point we'd probably prefer not to have the buildings.

To be less extreme though there is a thriving business in transforming redundant churches into housing. Nationalisation isn't going to allow that non-community use which is why we should rule it out. A market based system will allow it though which is why we should indeed be using markets to deal with this problem.

Not that we expect Sir Simon to grasp this given his own running of the National Trust, something akin to what he's proposing for churches.  

As The Guardian doesn't get, this is the market economy in action

It's obviously difficult to get an idea across to those who willfully misunderstand. But even then it should be possible for Aditya Chakrabortty and The Guardian to understand what it is they're observing. This isn't some oddity, this isn't some aberration of neoliberalism, this is the market economy in action:

This deserted campus was spotted by a not-for-profit company called 3Space, which convinced the landlord to give it the keys until demolition day. Since then it has made it a base for an army of eager startups, who pay a modest rent. This income then subsidises other rooms that go free to non-profits. And one day in 2016, 3Space boss Andrew Cribb rang up a guy he’d met a while back. “Hey, Ande. Remember your crazy green idea?” he said. “Fancy doing it?”

Cribb was wrong: Ande Gregson didn’t have one crazy idea – he had a couple. The green one came from reading about food. He’d see numbers, like the UN forecast that, by 2050, 9.8 billion people would share the planet, and he’d worry: how are we going to feed all of them? Then he’d read how 1.3bn tonnes of food are wasted every year, and he’d think: I’m going to help fix this.

Him. Without government backing or a multinational’s budget. Him. With no background in food or environment. When he was nine, Gregson wanted to be a marine biologist – but as a child of the 1980s he was given a Commodore computer, and from that point it was technology all the way. His CV was peppered with names such as Apple, BT and Sky. What did he know about public sanitation?

That was a big obstacle, which he hurdled with yet more unusual thinking. He opened a laboratory – called Green Lab – which others could use to invent solutions to the looming crisis in food and waste. He wouldn’t employ any of them, but they’d share the space and the hi-tech equipment, and make their own ideas fly.

Green Lab is a makerspace, and Britain has more than 150 of them.

This is being presented as being in opposition to prevaling economic thought and practice, that neoliberalism so deplored. But it's that very thing deplored in action. People spot assets being underused, badly used, not being used. They then employ them to do as they wish.

That is the market economy. Which then goes on to perform one more task for us. Those things which add more value than the expense of the inputs survive and grow, those that don't fail.

Sure, there's green and small scale and not governmentally approved and all that liberally sprinkled around the larger description here but at heart, what is this but that very market economy? Get on with it, as you wish, and see what works. That's not some perversion of neoliberalism, that's the point.

And aren't Chakrabortty and The Guardian going to get a shock when they realise that they're arguing for exactly what we've spent decades insisting upon? Though they may not realise it their solutions for this Brave New World of ours are exactly what we've all spent decades trying to put in place. Leave the planning and direction out of it and open up the economy to the entrepreneurs who try things out.

Are public sector policies keeping women out of the boardroom?

As I’ve mentioned in an earlier post, the public sector and public servants in Denmark are praised very highly by the left, to the extent where they reached a kind of cult status. For example, the Red-Green Alliance (Danish: Enhedslisten) in Denmark is currently campaigning on the Unions’ side of the ongoing collective bargaining, calling the public employees “the heroes of the Welfare State”. The public sector is often invoked as a magical solution to the equality differences between men and women.

Granted, the Nordic public sector did bring about high employment among women by providing jobs by expanding into sectors where jobs are dominated by women, and also by providing services that enabled women to combine work and family. But as Nima Sanandaji points out in a recent paper for the Cato Institute: the employment rate is not the only measure of women’s professional successes. When it comes to a different measure, number of executive positions among women, Sweden lags behind countries such as the US and the UK. How to tackle this problem is heavily discussed in the Nordic countries with quotas being one of the recurring proposals.

But quotas aren’t the answer. In 2003 a gender quota law was passed, requiring 40% of board members of public companies to be women. The law came into effect in 2008 and the consequences were swiftly seen - or rather, they weren’t. According to the Economist, a study in Norway found that quotas had no effect on representation of women in senior management. Changes in female CEOs were small as well, although they did double from 2% to 5%. Hardly the seachange promised by the law’s campaigners. Similar figures are seen in Denmark.

In addition, the otherwise law abiding Norwegians circumvented the new instated law. Although it looked like the publicly listed companies did follow the law and ended up with 40% of the boards being women, this was not the case. 100 of the 500 publicly listed companies changed their status and chose to delist from the Norwegian stock exchange in order to avoid the quota.

According to Sanandaji, the quotas led to firms’ valuations falling by more than 12% with every 10% increase of female board members. Overall, the quotas led to less experienced board members, because the pool of women with the high level of experience expected of board members was, at that time at least, very small in the Nordic countries. It’s been proven that more women on boards add value to companies with bad governance, as well. Board members have several tasks, but most importantly they have to determine which competencies are important. Therefore, effective board members with senior executive experience will know best what to look for in their CEO. In addition, women on boards are not judged by their gender per se but rather on their experience. So when women are put on boards because of their gender rather than their experience, the value of those women will be predisposed by their male board members. Quotas might therefore lead to those women without the senior executive experience to be overall less effective board members and end up giving diversity a bad name.

Instead of trying get more women on boards by compulsion, we should have a look at what is stopping women from getting the proper experience to get those executive positions themselves in the first place.

A big part of the explanation lies in the infamous and ubiquitous Nordic welfare state. In the Nordic welfare system parents are encouraged to participate in the labour market through child support and other publicly funded initiatives, but as we know, there is no such thing as a free lunch. Although these policies have helped women into the labour force, they must be paid for somehow. In the Nordic countries, they’ve decided to fund this through higher taxes, meaning the people in the Nordic countries have accepted a higher tax percentage.

It’s established that women tend to do more household chores than their male counterparts and that higher taxes tend to distort behaviour creating disincentives. Sanandaji draws a scenario of what taxes can do:

For example, highly skilled individuals such as professors often paint their own houses during the summer holidays. But a professor who sets aside an hour a day to paint her or his own house could spend the same time teaching a class. Teaching provides greater economic value because the professor is specialized in the task. It is therefore economically rational to spend the time teaching and pay for a professional painter, but high taxes change this decision. So Nordic professors and other workers are more inclined than their lower-taxed American counterparts to devote unpaid time to domestic work rather than work longer hours in their paid work.

In a study of how income taxes affect time allocation outside of work, they find that when economic rewards for participating in the labour force increase, paid work increases while housework decreases. The study found that high taxes have little to no effect on men. So when women have to decide between paid work or time spent at home doing other productive work, the opportunity cost of engaging in paid work compared to doing other productive domestic activities for women is too high and they choose the latter. In turn, according to the study, expenditures on goods substituting housework increases when incentives to move into work increases.

And being able to buy substitutes for household work is important if we want to see a shift of women to higher earning jobs, according to this study. In the paper, the authors find that temporary foreign domestic workers had a sizeable impact on increasing domestic female labour participation and allowing mothers to go into higher paying jobs.

Another part of the reason women aren’t getting the requisite experience is because of the public monopoly on generally female dominated sectors. Wages in these sectors are set at a flat rate centrally with the possibility of rising in pay mostly available just by rising up through the ranks. There are of course managerial positions but compared to the private sector the possibilities are limited. In addition, the public sector provides favourable deals for mothers, making it more attractive for them to go into this sector and go part-time instead of full-time. Combining this with prospects of long paternal leave, it is effectively making it attractive for women to withdraw from the labour market for long periods of time and inevitably making them lose out on precious experience to their male competitors.

The Nordic model has got a lot of things right in trying to equalize opportunities for men and women. However, it is not necessarily the ideal model as some try to make it out to be. One key aspect is the number of women who manage to reach the top and break the glass ceiling. Today very few women actually manage to do that and a lot of it comes down to the perverse incentives created by the big Nordic welfare states. If we want women to succeed we should enable them to do so by reducing the monopolies in the public sector and reducing taxes on work giving better incentives for women to work more and gain more experience. Overall, this would provide new choices for women to seek bigger and better opportunities for themselves.

The Problems with Local Planning Laws

Yesterday evening, we hosted the LSE's Professor Paul Cheshire who delivered a fascinating talk on the unintended consequences of more restrictive local planning. His recent research has found evidence that planning restrictions result in more empty homes, longer commutes, less affordable housing, crowded shops, and more.

You can view the slides from that lecture by clicking here, and listen to our Facebook Live recording here.

Brexit: one year to go

It's clear, we're coming out. The UK is leaving the EU. In agreeing the transition terms (or most of them), the Prime Minister has managed to leave both sides of her party grudgingly accepting the deal. So what is next? 

Well, between now and the end of September (or, allowing for the traditional EU fudge), October or November, the withdrawal agreement will be strengthened, with more parts coloured amber and then green. The heads of terms for a free trade agreement with the EU will be agreed. That is because all member states actually want a free trade deal with the UKin many cases their largest marketdespite all the bluster about not getting away scot-free. From November to March 2019, it will be a case of dotting the i's and crossing the t's on that free trade agreement. Then from April 2019 until December 2020 will be a process of obtaining ratification of the deal from member states and subsidiary bodies. And meanwhile, the UK will be negotiating free trade agreements with other countries such as the US, Canada, Australia, New Zealand, and China. 

Suddenly, Theresa Maywhatever you may think of her and her disastrous election campaignis looking stronger, not just in terms of her own party leadership, but in terms of how the EU are treating her. Forget the newspaper babble about Barnier being intransigent, the UK being outgunned. The discussions have certainly been forthright, but both sides figure that the outcome so far has been fair, and they aim to keep it that way, given the considerable progress already made. It is true that issues like immigration and the UK's contribution to the EU budget have united the other member states against the UK. But now the discussion is turning to other issues where the other nations are divided, or where there are clear interests in reaching mutual agreement with the UK. Ireland may have been playing up the border issue for domestic political consumption but it is plainly in their interests to have an open borderand with modern technology there is no problem about doing that. As Norway, and any of the many other countries that have open borders with their neighbours, show. 

Sure, business doesn't like change. But it is actually adept at adapting to change. And remember, our future is not down only to the big firms of today: it will be made by the pioneers of tomorrow, firms that may not even exist right now but will grasp the post-Brexit opportunities. And twenty years ago, 60% of our trade was with the EU. By 2020 it will be 40% and still falling. The Treasury's 'gravity model' is less and less relevant in this era of truly international trade and ultra-cheap freight costs. Gravity is a proxy for these costs and services have few such costs. Remember, services have just overtaken goods as the UK's main export earner and there are disproportionate benefits to liberalising services trade with countries with similar legal systems and common languages (just as we are looking to do with the USA, Canada, Australia, New Zealand and Singapore). 

Yes, we will be accepting regulatory unity with the EU and a lot of deregulationists don't like that very much. But it certainly makes negotiations easier. We are not starting from a position where our laws and regulations are far apart. We are starting from where we are: with a large volume of EU-agreed common rules, and free trade between us. So reaching a future deal becomes that much easier. 

And sure, we have to plan for the possibility of no dealthat member states do not ratify what is agreed centrally. Frankly, the UK is strong enough to weather that, the economy has repeatedly outperformed the dire predictions of the Treasury's doom and gloom economists. There's no reason to expect this trend not to continue. And the UK has a history of doing the right thing, even if others don't. We can be, and will be, a new force for free trade across the planet. We know how to do that. We've done it before. We have nothing to lose but our tariff and regulatory shackles: we have the world to gain. 

Getting one thing right about plastics recycling

You'll have noted that around here we're pretty keen on the use of markets. That's because using markets works, it achieves the goal we've set out to gain. Thus there is a certain celebration at the manner in which the new plastics and containers recycling scheme is to be set up.

No, this is not to say that such a scheme must be set up. Only that if it is this is the correct way to do it:

A deposit return scheme for drinks bottles and cans will be unveiled by Michael Gove today in a major victory for the Mail’s campaign to slash plastic waste.

As well as plastic bottles, the scheme will cover aluminium cans and glass bottles, the Environment Secretary will say.

It is expected to involve putting a small charge on recyclable bottles and drinks containers. This deposit would be returned when empty bottles or cans are returned to a new network of ‘reverse vending machines’.

Place a value upon something and it will be valued within those markets. It's not that complicated an idea.

In more detail, a or the major cost in any form of recycling is the collection from individual hands those items to be recycled. A returnable deposit gives an incentive to do so and we'll see people organising themselves into making money from doing so. Again, perhaps this isn't a task which needs doing but if it does then this is the way to do it.

We can even call this pollution of the empties a market failure if we wish. Not quite true, because it's an absence of markets and their incentives. Great, so add in the incentives and let the markets do their work. Or, as we might put it, markets fail? Then use markets. 

The BBC should start fighting fair and drop the licence fee

Over the past couple of days I have been following a small but protracted twitter debate (read 'tagged in endless back-and-forth non-sequiturs') about the BBC licence fee, the obligations of the corporation and the content our public broadcaster provides.

Dino Sofos, the producer of the rather good and award-winning Brexitcast podcast for the BBC, took issue with the accusation by commercial podcast producers that a new podcast commissioner for the BBC might well undermine the private market, where the BBC's new entrants are already starting to dominate. Matt Chorley, of The Times Red Box fame, said it wasn't so much a complaint about the BBC being innovative, entertaining and information so much as a concern that 'anyone thinking of launching a podcast without a high profile will think twice when they look at BBC domination of charts.'

This caused the following retort from Ione Wells (of the BBC):


Where to start...

  • The assumption that licence fee payers are happy at the moment? I imagine those people caught in the some 10% of criminal cases in England and Wales caused by licence fee issues might disagree...
  • The presumption that the BBC wouldn't be able to keep up with private companies if it were itself a private company? 
  • That fee payers would stop paying and then be sad that the service they're not paying for isn't performing as well as another service they're not paying for?
  • The idea that the BBC is in the shadow of any private media company in the UK?

The thing with paying for a service is that you show how much you value it. If my value from the service drops below the amount I'm willing to pay for it, then I stop buying it. If it's set lower than my value then I get to keep the amount I would have spent on it, can spend that on something else and have the feeling that I've got a bargain. 

As Hussein Kesvani, the UK/Europe editor of MEL Magazine and a producer of private podcasts, shared on twitter:


Hussein went on to say that this form of media is regularly made by people that come from BME backgrounds and those who struggle to break into mainstream media producers. They often have to be made on a 'shoestring, competing with broadcasters who can make shows cheaply and without commercial metrics.' If the BBC uses its market power to produce these too, they end up shutting off another avenue to producers of content and channels of talent. And it is one hell of a market share that the BBC uses its privileged position to command. The two main sites of and secured some 18.9bn page views in 2015 - more than three times the next competitor. 

There are things that must be done and can only be done by government and that only tax has the ability to pay for. Podcasts (and frankly radio, online magazine, and broadcast media) are not one of them. 

I get that journalists at the BBC want to produce cutting edge material. Of course they do. The people working there are ambitious and talented; and with resources to match. But they also need to understand the crowding out effect that the provision of public money, backed by criminal convictions for non-payment, has on the private market and viability of new innovators.

So what's the alternative? Well it's simple, we don't need to reinvent the wheel. Just implement a subscription model. 

When you pay you get access to the services, if you don't pay then you can't. For radio, you can use advertising. 

Thanks to the rise of providers like Netflix, Sky's Now TV, Amazone Prime, Apply TV, Apple Music and Spotify (to name but a few), we already know that subscriptions for high-quality services will be popular and affordable. They're popular across multiple formats too. People that like TV services can buy them for streaming or for playback, and those that like radio, music or podcast features can buy those. They can buy single programmes and continuous rolling payments for broader access. They can buy from one or many providers at their leisure.

Yes, I can imagine that if the BBC were to move to a subscription model that some stations, programmes or media will have to stop. And some really popular ones might get even more resources to meet market demand. That's a good thing. It's means that resources are being prioritised correctly. 

The BBC could even start providing to customers based outside of the UK (they already do, but only to Irish viewers, for free if it's watched live...). We even have estimates for how popular a service might be despite our current prohibitive approach. While at present, so as not to undermine the case for the licence fee at home, the BBC doesn't allow those living elsewhere to access the iPlayer service, over 65m viewers across the world access it via VPN or proxy servers. Make it available to subside to, and it's likely legal users will soar. The BBC is missing out on millions of potential paying customers by geo-restricting access, and we're all paying for it. 

If the BBC wants to dominate more markets, it can open up to the world, and it can start by fighting fair at home too.

Glory be, Paul Ehrlich is still wrong

We;re arriving at the 50th anniversary of Paul Ehrlich's megaselling panic book, The Population Bomb. Nothing predicted in the book has come true therefore it's still a bible to a certain sort of environmentalist. You know, those who insist that precisely because it hasn't come true yet it's obviously about to.

At which point the observation that Paul Ehrlich is still wrong. But not just wrong about what will happen, wrong about the solutions too:

Fifty years after the publication of his controversial book The Population Bomb, biologist Paul Ehrlich warns overpopulation and overconsumption are driving us over the edge

A shattering collapse of civilisation is a “near certainty” in the next few decades due to humanity’s continuing destruction of the natural world that sustains all life on Earth, according to biologist Prof Paul Ehrlich.

Well, if that's true then we've not got to worry about climate change, do we? For the very basis of any concern we might have over that is that industrial civilisation continues for the next century roughly as currently. If it's not then there won't be that climate change. Ehrlich doesn't argue that we shouldn't be doing something about climate change therefore either he doesn't believe his own argument or he's simply ignorant of our climate models.

But more than that he's wrong, even if we accept his predictions and concerns, about how to avoid the civilisational collapse:

The solutions are tough, he says. “To start, make modern contraception and back-up abortion available to all and give women full equal rights, pay and opportunities with men.

“I hope that would lead to a low enough total fertility rate that the needed shrinkage of population would follow."

Sure, those who desire to use contraception should have access to it. Sex is far too much fun for that not to be a useful goal in increasing human happiness. But the problem with Ehrlich's argument is that access to it doesn't have much effect upon fertility. The best guesstimate is that such access explains about 10% of the change in actual fertility - it's the desire to use it which explains the other 90%.

What is it that changes that desire? Richer people have fewer children. We've observed this absolutely everywhere that people have got rich, this isn't an arguable point. You want to reduce population then get people rich.

To be wrong in your predictions and also wrong in the solutions to your own predictions is pretty good going but then Ehrlich hasn't really changed these past 50 years, has he? 

Of course the aid NGOs are bureaucratic and inefficient

The Guardian's running a series about what it's like to work in the aid business. Apparently it's a nightmare of bureaucracy, infighting and inefficiency. This should not surprise us:

I recently resigned from my job with a non-governmental organisation in Africa. After years of working in the sector, I have been left disillusioned with the ethos and impact of these organisations.

The sector is filled with the wrong people with the wrong motivations and the wrong agenda. It is, after all, a business enterprise worth $27.3bn, at least in 2016. Missions in country are incentivised by money. The more you can raise, the happier your colleagues in the region and in headquarters because some of that money goes into paying their salaries and office rents – and your performance in the country is linked to that, rather than the quality of the programmes you are running.

In the eyes of senior management, a successful humanitarian operation is based on two key indicators: how much money you raise with the donors and how many beneficiaries you have reached with the aid money you have been given. However, in my experience, what is not measured is how well you have managed projects in addressing the real needs of the intended recipients, how accountable you have been to them, and how quickly you have been able to address their urgent needs in humanitarian emergencies.

Why shouldn't this surprise us? Because this is just what will happen if and when we measure success as we do. Think on how we do in fact measure overseas development aid, that levy upon our own tax payments so graciously sent off to foreign climes by the government.

We don't measure what is done with it. We don't measure the efficiency with which it is spent. We don't even, to any great extent, measure the effect it has. Instead we pat ourselves on the back - or perhaps those who send our money pat themselves on their backs for sending our money - for sending a certain amount of money. An amount that modern politics seems to think is inviolable.

We've a budget that must and will be spent with little to no attention paid to how or why it's spent? Who expects anything other than bureaucracy, inefficiency and infighting? Or, as we might put it, the gross wasting of that cash lifted from our wallets?