When unequal is equal
A terrible economic policy from the UK
The refuse is piling up. For nearly two months, Birmingham garbagemen, or binmen as they are known in the UK, have been on strike. Garbage bags have been sitting out for weeks, and as the temperature warms, the stench is increasing. Residents report seeing rats the size of cats. The ostensible reason for the binman strike is familiar. To cut costs, the City Council of Birmingham has tried to push through a policy that reduces garbage truck crew size from four workers to three workers. Unite, the binmen union, called for the strike after talks between the union and the city collapsed.
It sounds like a run of the mill labor dispute. A city wants to cut jobs, and the union wants to preserve them. Lurking behind the scenes, however, is a much larger issue: equal pay. According to the Equality Act of 2010, workers doing equal work must be given equal pay. At first glance, this sounds similar to laws many countries have to prevent discrimination. A company or city can’t pay male clerks more than they pay female clerks or white drivers more than they pay black drivers. Doing so is discriminatory and should be punished. The problem with the Equality Act of 2010 is that it doesn’t say that workers doing the same work should be entitled to the same pay, it says that workers doing work of equivalent value are entitled to the same pay. According to the law:
For the purposes of this Chapter, A's work is equal to that of B if it is—
(a) like B's work,
(b) rated as equivalent to B's work, or
(c) of equal value to B's work.
(2) A's work is like B's work if—
(a) A's work and B's work are the same or broadly similar, and
(b) such differences as there are between their work are not of practical importance in relation to the terms of their work.
It might sound anodyne, but the consequences of such a bill have been tremendous. It means that if job A is “like” job B, then both job A and job B need to pay the same. For the City of Birmingham, this presents a large problem. Binmen are paid significantly more than caterers and cleaners. Workers in the latter two professions sued, arguing that since working as a caterer and cleaner is "broadly similar” to working as a binman, they should be given equal pay, as well as awarded backpay for years of being paid less than their similar job counterparts.
This is absurd.
Working as a caterer versus a garbageman is nothing alike. Working as a cleaner versus a garbageman is barely in the same ballpark. Around the world, garbagemen are paid a premium for their services. Considering that the job can be done effectively by any able-bodied adult, the pay is good. As it should be. Working as a sanitation worker is incredibly taxing work. It’s also dangerous. There is the constant risk of being hit by a car or being stabbed by something in a refuse bag. Given the same pay, I would way rather work as a cleaner, and certainly a caterer, than a binman.
Yet the courts in the UK have disagreed. They have ruled that since being a caterer, cleaner, or binman or similar, workers in all three professions must be paid the same. On top of that, caterers and cleaners must be given backpay for their years of supposedly underpaid employment. The bills have piled up. The City of Glasgow in Scotland paid £770m to settle their equal pay claim. The City of Birmingham filed for the municipal equivalent of bankruptcy in 2023.
Not happy to merely put taxpayers on the hook for billions of dollars, the courts have also punished private firms. Next, a British clothing store, was sued by store workers in 2018. They were upset that Next employees who worked in one of the company’s warehouses were paid more than those employees who worked in stores. The court's decision, described by Alex Tabarrok at Marginal Revolution, is Kafkaesque.
Simple common sense makes clear that working in a clothing store is not the same as working in a warehouse. How could anyone argue otherwise? Yet, the court examined the case, and tried to quantify the work that store workers and warehouse workers did. Using a highly dubious system, they determined that a store employee’s work was worth 440 points. A warehouse worker’s job, meanwhile, was worth 340 points. Thus, the jobs must be paid the same.
First, this method of assessment is totally bonkers. Beyond that, readers with acute math skills will notice that 440 is not equal to 340. Yet, the court ruled the jobs must be equal.
Equal Pay Act claims have skyrocketed over the last decade. If, as expected, they continue to increase, they will have ruinous effects on the economy. It’s easy to imagine all sorts of workers claiming that their work is similar to other work, and thus they are owed millions of dollars worth of back pay. To take one example, consider AI computer programmers. Their skills are in very high demand right now. They are likely to be paid more than other computer programmers. Under the Equality Pay Act, this would likely be against the law. Thus, British firms will be hesitant to invest in AI, knowing that any workers they hire might require them to pay millions in a few years if a court rules they violated the law.
The larger point is simple: prices are not random. They are also not the result of a conspiracy. There is no smoke-filled room of men with cigars throwing dice to determine how much binmen get paid compared to caterers. Binmen are paid more because the job is difficult, physically taxing, and dangerous. Same with apparel employees. Warehouse workers are paid more than store workers because being in a windowless warehouse all day moving boxes is less pleasant than being in a well-lit store selling clothes to customers. Wages differ because of supply and demand. If a lot of people find a job to be enjoyable, and that job has low credentials, then that job will not have a good salary. There isn’t anything nefarious or malicious about it.
As the saying goes, a price is a signal wrapped in an incentive. Ignoring those signals and incentives will result in nothing more than the inequality of forced sameness.