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Milton Friedman: Markets don’t Discriminate, Governments Do

Posted by Steve Markowitz on April 20, 2014

One of the brilliant economic minds of the 20th century was Dr. Milton Friedman.  He had the rare combination of advanced economic knowledge and common sense.

One of Dr. Friedman’s lectures in the late 1970s was on the subject of equal pay, whether by gender, race, etc.  Friedman proffered the conclusion in the video below that when the government mandates equal pay it removes economic penalties from employers for discriminatory behavior.  Specifically, in the absence of equal pay laws, should an employer penalize an employee based on a nonproductive discriminatory practice, that employer will be penalized via higher costs and lower profits.  For example, should he refuse to pay equally qualified women adequate compensation for a job, some other capitalist (employer) will offer a higher wage for that employee and gain economic advantage.

Friedman concludes: “I do not believe that it is desirable that we move in the direction of having a government bureaucrat decide whether A may hire B or not, whoever A and B are … and in consequence I think programs of this kind are both reducing our freedom and reducing equality.  And they will … disadvantage … the very groups [they] intended to help.”

Contrast Freeman’s conclusion with that now proffered by President Obama.  Last week he made a National Equal Pay Day proclamation using typical Obama rhetoric stating incorrectly that “women still make only 77 cents to every man’s dollar.” This claim is ludicrous to anyone who understands basic Econ 101.  No sane (greedy) capitalist would hire a man if he could hire a woman to do the same job and at the same quality level at a 23% discount.

It is interesting to view history since Friedman’s lecture over 30 years ago.  Equal pay laws have been added and strengthened with thousands of bureaucrats being added to enforce them.  Obama’s contention last week that “women still make only 77 cents to every man’s dollar”, if correct, would attest to the government’s abject failure in remedying this supposed discrepancy.  To that Progressives would add still more laws and more bureaucrats.  More liberal logic.


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