Canstats

Are Women Being “Gouged” by a “Gender Tax?

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“‘Gender tax’ gouging women,” reads the headline of a recent article published by the CanWest News Service. “Companies get away with overcharging customers with extra X-chromosome,” continues the sub-header. The article raises three dubious issues relating to women’s ability to purchase goods in free and competitive markets.

First, the article discusses the fact that women, reportedly, pay more for certain goods and services than do men – ostensibly for the very similar services, such as the dry-cleaning of a shirt, or a haircut of comparable complexity. One woman in the CanWest article even put the theory to the test, going to her husband’s hair stylist for a similar type of haircut, and was shocked to be handed a bigger bill than her husband usually gets. That may all be true. But as author Jacob Sullum points out, the idea that the only fair price for a good or service is the cost of producing it stems from a medieval Christian ethic, not an economic perspective (Sullum, 1998). Sullum observes that modern economists would hold a quite different view, that “Given choice and competition, it’s generally accepted that buyers and sellers should be free to determine prices: If you think the convenience store on the corner charges too much for Diet Coke, you can go somewhere else.” Sullum also observes that many times there are differences between men’s and women’s services that justify differential pricing: “Many salon owners and dry cleaners say there are sound business reasons for such disparities. Women tend to have longer hair, and their styles take more time. Women’s clothing often has pleats, ruffles, lace, decorative buttons, or other doodads that require special care. Their shirts may be too small to fit old presses designed for men’s clothing, so they have to be ironed by hand.” Activists against gender-based pricing argue that such differences should be accounted for by pricing based on effort. But the fact that business owners (female as well as male) have chosen gender-based pricing over item-based pricing would seem to imply that they find it more efficient, and more profitable in a competitive market.

Second, the CanWest article raises the arguments of certain activists who claim that women shouldn’t have to pay tax on items that they require because they are biologically female, such as feminine hygiene products, brassieres, and pantyhose. The clothing and hair styling are included because, the article explains, “But the reality, as countless studies have shown, is that attractive, well-groomed people are the ones who get ahead. That means personal-care expenses are not necessarily optional.” The implications of this idea are fairly breathtaking. If we stipulate that people shouldn’t be taxed on things they require because of biological necessity and the need to be competitive in the workplace, and we apply that principle uniformly, it’s not only women’s products that should be tax-exempt – we would have to eliminate the taxes on shaving supplies for men, ties, suits, condoms, items related to prostate health, products related to male-pattern baldness, cologne, fancy cars for the male mid-life crisis, and shoe lifts, as short men are paid less than taller men (or women). Virtually all children’s products would have to be tax exempt, as children’s products are, by definition, only needed by virtue of the person’s childhood. For that matter, under the “biology dictates taxation” philosophy, wouldn’t all drugs, and all foods have to be tax exempt? After all, we all must eat, and take medications due to biological reasons, and to remain competitive in the workplace.

Finally, the CanWest article raises the old, repeatedly de-bunked statistic that “the average Canadian woman makes only 64 cents for every dollar a man makes.” As we observed in a previous bulletin:

Women earn the same as men in traditional, male-dominated areas. When women do take high-paying jobs in fields that are dominated by men, such as computers, engineering, medicine, law, and biochemistry, women earn virtually the same as what men earn. The supposed gender wage gap is due mainly to occupational segregation than to discrimination.

The difference between male and female earning power melts away when one controls for experience, market qualifications and work patterns. The statistic that Canadian women earn 64 cents for every dollar earned by a man does not take these factors into account. Among single, never-married men and women, the gender pay gap does not, for all intents and purposes, exist.

To the extent that any wage gap exists, it is a product of individual choice, not workplace discrimination. Canadian men tend to have higher preferences for risk than do women, which translates into less stable but higher-paying jobs. People – single, married, young, and old – have different preferences for educational attainment, type of work, risk, and long hours.

Should women choose to enter higher-wage professions, they have the educational background to do so. According to the latest census data, more than 60 per cent of Canadians who earned more than $100,000 in 2000 had a university degree. Almost 60 per cent of those who earned less than $20,000 never went beyond high school. Where does this leave Canadian women? Women make up precisely half of all university graduates in Canada; they accounted for 59% of the growth in new graduates in the 1990s. What’s more, Canadians are the most highly educated population in the world, in terms of university graduates.

The biggest factor in the earnings differential between women and men is child-rearing, not discrimination. Women who take time off to give birth and raise children have a different relationship with the labour market than do men and childless women. For any number of reasons, Canadian women often opt for part-time employment or choose work in child-care or clerical because they can exit and re-enter such jobs with relative ease. This, in turn, increases the supply of workers in these areas and pushes down salaries.

Kenneth Green directs the Centre for Studies in Risk, Regulation, and Environment at The Fraser Institute.

References:

Joanne Sasvari (2004). “‘Gender tax gouging women’” The Vancouver Province Sunday, May 23, 2004.

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