We need to judge policies by good outcomes not just on good intentions

 
Ryan Bourne
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OVER the past week, two aspects of our public debate have become noticeable. First, many judge policies by their intentions, not their effects. This often leads to policymaking that seeks fairness, but actually eliminates opportunity. The second is that unequal outcomes are often just assumed to indicate institutional bias or injustice. Both result in do-gooders pushing misguided policies, wrapped up in seductive sound-bites.

Take last week’s “Equal Pay Day”, when campaigners highlighted a 15 per cent aggregate gender pay gap for full-time work. We rightly condemn employers who discriminate against women, but it’s not at all clear that differences are generally a result of discrimination (as some suggest).

You would only expect completely equal pay if men and women were always doing the same jobs, had the same qualifications, and the same length of service. This is sometimes not the case, not least because some women choose to take time out for children, and widespread higher education for women is a relatively recent phenomenon. The Office for National Statistics actually shows that women in full-time work in their 20s earn more than men of the same age. Women fall behind when they hit their 40s – after periods when many take time out. In some situations, pushing for “equal pay” where there are unequal existing circumstances (like differences in work history) may hurt women in hiring decisions, with employers deciding it is more worthwhile to employ men.

A similar issue is seen in the well-intentioned campaign for the low-paid to receive a “living wage” (where focus groups determine a rate at which working full-time would cover the cost of living). This is currently voluntary for business, but politicians want to go much further.

Economic theory suggests it’s the young and unskilled who would face fewer opportunities if the living wage were mandatory. Already, 15.1 per cent of young people in the UK are not in education or training. The National Institute of Economic and Social Research estimates that rolling out the living wage nationwide would lead to 300,000 fewer young people employed, as employers would substitute them for more experienced workers.

In fact, the prevalence of unpaid internships suggests there are plenty of jobs between £0 and the existing minimum wage of £6.31 per hour at which employers and employees could agree contracts. While we should sympathise with how difficult it is to live on no pay, many young people choose to do internships to obtain the non-wage benefits that employment or training gives: experience, skills or networking. They’d prefer to be paid, of course, but recognise many of these chances wouldn’t exist if the firm had to pay the full minimum wage.

Yet having taken away the young and unskilled’s ability to compete with older workers via wages, there are now calls to stamp out unpaid internships. Campaigners seamlessly move from slamming them for being exploitative to explaining that they represent significant opportunities for those from wealthy families. They say that, since there are many internships in London, they must benefit the rich – despite the capital having some of the poorest neighbourhoods in the UK. The net opportunities potentially lost are seen as a price worth paying for further levelling the playing field nationwide.

With their emotional notions of justice, campaigners thus sometimes risk harming the very groups they purport to help.

Ryan Bourne is head of economic research at the Centre for Policy Studies @RyanCPS