I attended the Association for Private Enterprise Education annual conference in Las Vegas earlier this week. One of the sessions I attended was titled “Improving Women’s Welfare: Economic Freedom, Gender Ideologies, and Entrepreneurship.”
One of the presenters showed a slide about the federal government’s 1978 Pregnancy Discrimination Act (PDA) and said that this had expanded economic freedom for women. I wrote her a note saying that, au contraire, it reduced economic freedom for women and employers. When I ran into her in the hallway later, I pointed out that, in addition, one Harvard economist’s study found that it was paid for by married women of child-bearing age.
Here’s an elaboration of my points.
Economic Freedom
Whenever the government interferes with contracts between employers and employees, it reduces the freedom of both sides. Take the PDA. One can certainly imagine a married women who would want the freedom to contract with an employer who doesn’t offer a pregnancy benefit. Why? The most obvious reason is that she might not want to get pregnant. The benefit, then, would appear to be of no value to her. But it’s worse than that. Although the benefit is of no value, there is a cost. There’s no such thing as a free lunch, and employers, if forced to offer this benefit, will figure out ways to reduce pay (either in dollars or in other benefits) for women, especially married women, of child-bearing age.
Which brings us to the economic issue: who pays?
Who Pays for the Pregnancy Discrimination Act?
In June 1994, the American Economic Review published “The Incidence of Mandated Maternity Benefits” by Jonathan Gruber, at the time an assistant professor of economics at Harvard University. What he was able to do was compare the growth of pay in states that already had mandated pregnancy benefits with the growth in states that didn’t have mandates. He hypothesized that in states without mandates, pay for married women of child-bearing age would grow more slowly once the PDA came into force than in states that already had the mandates. And that’s what he found.
He wrote:
The findings consistently suggest shifting of the costs of the mandates on the order of 100 percent, with little effect on net labor input.
In short, the women who are supposed to benefit from the mandate are the ones who pay.
BTW, both Gruber and I drew on his research when we testified before Senator Ted Kennedy’s Senate Labor and Human Resources Committee, when “Hillarycare” was being considered and was on its last legs before its defeat. Jonathan was invited by the Democratic majority; I was invited by the Republican minority, whose ranking member was Senator Nancy Kassebaum of Kansas. She was, incidentally, the daughter of 1936 Republican presidential candidate Alf Landon.
The pic above is of me testifying before Kennedy and Kassebaum.
[Editor’s note: This episode of the Great Antidote with Kerianne Lawson on women and economic freedom may also be of interest.]
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