All economics, as I might have mentioned before, is either footnotes to Adam Smith or wrong, which is a good logical lens through which to view this latest equal pay case at Next. The largely female workforce in the shops should be paid the same as the slightly male biased one in the warehouses and distribution centres, an employment tribunal has ruled, for the jobs are of “equal value” and therefore should be paid the same. 

It’s that initial Marxian concept … which is the source of the rot

This is to import into the British economy and law a distinct economic mistake — that there’s any measure of value other than how much someone is willing to pay. But then cod Marxism has been making inroads for some time now. The particular law this all falls under is from the European Union of course. They’ve just strengthened it — which we don’t have to — but the idea stretches back decades. The idea is that it is possible to assign some “value” to labour and that that is what it should be paid. Once that is accepted then the idea that pay across work with a gender selection effect — men tend to choose this, women that — is a much easier sell. But it’s that initial Marxian concept, that there’s a valuation other than willingness to pay, which is the source of the rot.

But that’s where we are now. Judges, in court, determine the value of labour then insist that equality of worth must mean equality of pay. Yet things get worse than this. The court agreed there was no direct discrimination — no conscious or unconscious influence of gender — but decided that unequal outcome was inequitable in law. There was even an insistence that as the difference in pay was justified merely by efforts to “reduce cost and enhance profit” it was not allowable — even that a higher rate could have been paid and that the reason it wasn’t was purely financial. This led to one memorable comment: “that is how running a company works you cloth- brained Muppet”.  

We’ve even the sight of one set of evidence, an investigation, making all the right points. It was easy to hire shop staff at the wages on offer — difficult to hire distribution staff even at higher rates. That is, the work wasn’t being valued equally by the people expected to do it. Therefore the work clearly wasn’t of equal value. This obviousness is being rejected in favour of the ruling that as wages were different then that’s unfair, innit?

This is only a part of a wave of such cases. Birmingham city council was, in part if not in whole, brought down by a case over pay rates for “equivalent jobs” and other retailers are in the firing line. 

The entire idea is undermining the most basic process of a market economy – supply and demand. Something is worth what someone will pay for it and nothing else. The amount they have to pay depends upon their demand for it and the number of willing suppliers. Yes, even to the point that people might get paid less for indoor work without heavy lifting to people doing warehousing work.

But more than that the subject is discussed in Smith. “The whole of the advantages and disadvantages of the different employments of labour and stock,” he wrote:

… must, in the same neighbourhood, be either perfectly equal or continually tending to equality. If in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This at least would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper. Every man’s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment. 

Elsewhere on the point he talks of some jobs as being more “noisesome”, which in his time meant smelly. The compensation for a job includes those conditions, like smells, as well as the wages paid.  The combination of all — the compensation — for jobs is therefore the same across all jobs. 90 per cent of actors never get paid a bean because striding the stage is fun, lawyers gain massive salaries because they work with lawyers. This accords with our innate sense of fairness.

This very claim to be calculating the equal worth of the jobs is therefore an error. For it is indeed only looking at a part of the compensation, not the noisesome element. This is even before we get to the more usual supply and demand issues.

This is one of those bits of economics which is not just a footnote — this is wrong. But there is still joy here. This is indeed EU law which means that we can now change it. Which we should (that was rather the point of leaving after all). But will any of our Conservative candidates take the issue seriously?