Wage Inequality: How Not to Fix It

There was a great little piece on Business Insider this morning about Patricia Arquette’s acceptance speech at the Oscars. It got me thinking.

Let me start by saying that I am a firm believer in equality in all areas: male/female, black/white, whatever. Whilst there are undoubtedly differences in individuals’ capabilities that’s what makes the world an interesting place and there is absolutely no justification for discriminating in favour or against someone simply because of their gender, race or any other trait.

I’m just not at all convinced that legislation is always helpful. Take the following example. When my two sons were younger, they attended the local Preparatory School. One of the women teachers there went on maternity leave several times, returning briefly between each stint to teach for maybe a term. This is difficult for both the kids and the school to manage: they have to expend management time locating & interviewing temporary teachers to cover the role, and then even if those teachers are fantastic, they have to let them go when the original employee deigns to return. The kids likewise have to adjust to repeated changes of teacher. Like it or not, as chief executive of a business like that, wouldn’t part of you be saying to yourself (not out loud, for obvious reasons), “Why hire women [who go on maternity leave] when we can hire men [who generally don’t]?”

This is not an isolated example. In a small business where perhaps there is a single employee in a key role (say, specialist lawyer, CFO, etc) how can they deal effectively with this situation? Often, by not hiring a women of child-bearing age in the first place. I’m pretty sure this is a common occurrence – it would certainly help explain the gender pay gap.

Now, I fully support the idea of both parents wishing to spend time with their children, especially when they are pre-school age, as there’s plenty of evidence that this is a great thing from a social and educational point of view. Giving fathers the same rights as mothers to take parenting leave is all very well — but it doesn’t solve the problem, it makes it even more difficult for small businesses to know what to do.


This article first appeared on LinkedIn 23 February 2015

Putting the Gini Back in the Bottle

An article by The Economist on Twitter caught my eye a couple of days ago.

It shows that the wealthiest 0.1% of Americans control around 22% of the nation’s wealth — almost exactly the same proportion as the bottom 90% of citizens. This hasn’t happened since the late 1930s and the article seems to be lamenting the passing of a period where wealth was more evenly distributed.

One problem here is that there probably isn’t any really good data on income or wealth inequality going back further than the early 1900s; because I’m pretty sure that if there were, we’d see that the post-WW2 period was the outlier.


I’m not arguing that wealth inequality is necessarily good, just that it’s probably¬†natural.

I’m not too concerned about the Paris Hiltons of the world…. “rags to riches and back again in three generations” comes to mind; I’m sure they’ll fritter it all away if they’re not smart enough to look after it — or their parents will follow Warren Buffet and give it all away rather than passing it to his offspring.

At the other end of the spectrum though, think about the technology sector, for example. Innovations like Apple’s App Store have made application development tremendously accessible: it’s literally now possible for a team of maybe half a dozen teenagers with a good idea and some coding skills to put together an app in a relatively short space of time that could gross tens or even hundreds of millions of dollars in revenues. Not every app is going to succeed, but how many pursuits were there in, say 1965 (when I was born) where someone potentially without any formal qualifications and with very little capital could make that kind of money?

On a slightly larger scale, look at Finnish game developer SuperCell. Following $12mn of VC investment in 2011, they developed two games, one of which was¬†Clash of Clans — an app that grossed nearly $900mn in 2013. I don’t know how many employees they had in 2011-12 when the game was developed, but I’ll bet it was a pretty small core development team.

To me, this is a kind of democratization – literally with nothing but a laptop and an idea, it’s possible for a talented coder anywhere in the world to come up with something pretty awesome and sell it globally. Of course, if they succeed they will make a ton of money and in doing so “mess up” the Gini coefficient; but honestly, who’d want to live in a world without that possibility?


This article first appeared on LinkedIn 11 November 2014