Trump was right to stop “pay gap” data collection. | More price gouging please. | Also: The lessons of Katrina, a Master of Venn, protectionism fails.

September 2, 2017
The Department of Labor wanted to force employers to collect employment data that it could then use to sue them. The Trump administration rightly recognized that such a policy would have detrimental consequences for employment relationships—especially for women. Price gouging is just another word for prices and real prices are never more needed than following a natural disaster. A reminder: One of the lessons of Hurricane Katrina is that the private sector brings aid faster than the federal government. Mark Perry is good at using Venn diagrams to show the inconsistency of the Left. Protectionism, contrary to what you have been told, didn't save Harley-Davidson.
The unintended consequences of policies aimed at eliminating the pay gap: Beginning in 2018, businesses with more than 100 workers would have had to collect and report data on employment by race and gender to the Department of Labor. However, this week the Trump administration put a halt to that initiative. As Romina Boccia writes, the data collection effort, while intended to address the so-called pay gap between men and women, would have induced companies to adopt pay policies more likely to hurt women: "Women have shown a strong preference for in-kind benefits over cash wages in polls, for example, which is not included in studies that explore the reasons for the gender wage gap. "According to a Department of Labor study, differences in education, experience, choice of industry and occupation, career interruptions, and hours worked explain all but 5 cents of the so-called wage gap. Immeasurable components of compensation—such as flexible work schedules—likely account for the remaining gap. […] "Employers who are weary of costly discrimination lawsuits against them react most effectively to such a rule by adopting more rigid pay structures. "To the detriment of workers, the best way to protect against unfounded discrimination claims based on incomplete data is to have one-size-fits-all pay structures that fit neatly into the boxes on government reporting forms. "The problem is that this reduces the availability of flexible work arrangements, which are especially important to working parents. It also leads to less performance-based pay, like bonuses, which encourage and reward excellence. "Boxes on government forms simply can't capture sufficient data to explain differences in wages and promotions based on employee behavior and preferences. The result is less flexibility and more rigidity in the workplace. "Differentiated pay is a crucial mechanism for attracting and retaining qualified employees. Rigid pay structures distort the labor market, reducing economic growth and job and wage prospects for many workers." [The Daily Signal]   Outlawing price-gouging harms the victims of natural disasters. Thomas Sowell: "[W]hen some natural disaster such as a hurricane or flood suddenly destroys many homes in a given area, the price of hotel rooms in that area may suddenly rise, as many people compete for a limited number of rooms in order to avoid sleeping outdoors or having to double up with relatives and friends, or having to relocate out of the community. People who charge higher prices for hotel rooms, or for other things in short supply in the wake of some disaster, are especially likely to be condemned for 'greed,' but in fact the relationship between supply and demand has changed. Prices are simply performing one of their most important functions—rationing scarce resources. When some disaster suddenly makes those resources even more scarce than usual, it is important that prices reflect that underlying reality, so as to reduce the demands that each individual makes on the reduces supply. "Regardless of what hotel owners charge, a sudden and widespread destruction of housing in a given area means that there may not be nearly enough hotel rooms for all the displaced people to get the kinds of accommodations they would like. If prices had remained at their previous levels after the hurricane, a family of four might well rent two rooms—one for the parents and one for children. But when hotel prices shoot up well beyond their usual level, all four family members may crowd into one room, in order to save money, leaving the other room for other people who have likewise lost their homes and are equally in need of shelter. The more stringent scarcity of housing in the wake of a widespread destruction of homes is inherent, even if temporary, and prices merely reflect that underlying reality. If the government were to impose price controls under these conditions, then those who happened to get to the hotels first would take up more space and leave more latecomers without a place to sleep indoors in that community. […] "In short, prices force people to share, whether or not they are aware of sharing. Prices perform this function both in normal times and in emergency times. While sharply higher prices may be resented during emergencies, their functions are even more urgently needed at such times." [Thomas Sowell, Basic Economics: A Citizens Guide to the Economy, Basic Books, 2004, pp. 18-19.] And Don Boudreaux explains it in an open letter to the Texas Attorney General. "Government intervention is often justified as a means of correcting 'market failure.' But by enforcing prohibitions on 'price gouging' your office causes market failure. Penalizing merchants who raise the prices of goods and services prevents markets from truthfully conveying an unfortunate but undeniable truth – namely, the natural disaster caused available supplies of goods and services to fall significantly relative to the demand for those goods and services. By forcibly keeping 'legal' prices lower than their actual market values, you not only encourage black markets and other corrupt and corrupting processes, you obstruct the information and incentives that are necessary both to persuade consumers to now use those goods and services more sparingly, and to spur suppliers from around the world to rush to the devastated areas additional supplies of those goods and services." [Café Hayek]   The private sector responds to disasters better than the federal government. That's one of the lessons of Hurricane Katrina. Steve Horwitz describes how Wal-Mart and other private companies were on the scene with supplies much faster than the federal government after Hurricane Katrina hit New Orleans in 2005. [Mercatus Center] You can learn more about the Mercatus Center's research on the recovery from Hurricane Katrina by visiting medium.com/mercatus-scholar-commentary/10-years-later-katrina-and-the-political-economy-of-everyday-life-6722ab3c3258.   Master of Venn: Mary Perry knows how to use the Venn Diagram to show the inconsistency of the Left. Here is one timely example: That and 11 more of Perry's best Venn Diagrams have been compiled into one collection by the Foundation for Economic Education. [Foundation for Economic Education]                                                                                                                       It's a Myth that Protectionism Saved Harley-Davidson. The resurgence of Harley-Davidson following the imposition of tariffs in 1983 is often cited as an example of successful protectionist policy. But it just isn't so, writes Scott Lincicome: "Because of higher prices [induced by the tariffs], U.S. consumers paid approximately $150,000 ($351,000 in 2017 dollars) per U.S. motorcycle manufacturing job allegedly saved by the tariffs in 1984. […] "Even more damning, however, is the fact that the tariffs played a very small role, if any, in Harley's resurgence. First, import competition had weakened even before the tariffs were imposed—Harley made large bikes with 1000cc and 1300cc engines, while Japanese competitors (the main target of the safeguard) focused on smaller motorcycles with engines under 1000cc. Second, the targeted Japanese exporters easily avoided the new tariffs. Because only motorcycles with 700cc engines or larger were affected by the tariffs, Japanese manufacturers Honda, Suzuki, and Yamaha just developed, produced, and shipped motorcycles with engines between 695cc and 699cc. Kawasaki escaped the tariffs by shifting more assembly activities to its U.S. plant. Third, the United States exempted motorcycles from Germany, Italy, the United Kingdom and elsewhere, thus permitting brands from those countries to compete freely in the U.S. market. Finally, contemporaneous reporting from the 1980s showed that a complete overhaul of Harley-Davidson's management, manufacturing, and marketing policies—not tariffs—was responsible for the company's resurgence. The overhaul included, ironically, Harley's adoption of Japanese manufacturing techniques. "U.S. motorcycle sales data from 1983 to 1987 demonstrate the futility of the import protection that supposedly saved Harley-Davidson. Harley's annual sales of motorcycles below 1100cc (i.e., the types covered by the tariffs) averaged 27.89 percent of the company's total sales in 1983 and about the same share, 27.58 percent, in 1987. Japanese firms, by contrast, shifted sales to smaller motorcycles: 700–1099cc models dropped from a 53.98 percent share of their 1983 sales to below 28 percent in 1984–87, while their annual sales of 450–699cc models increased from 43.38 percent of total sales in 1983 to over 60 percent from 1984–87. These and similar data led economists Taiju Kitano and Hiroshi Ohashi to conclude that 'the safeguard provided by the U.S. government until 1987 explains merely 6 percent of Harley-Davidson's sales recovery.'" [Internal citations omitted.] [Cato Institute]
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