Tim Worstall questions whether Polly Toynbee was correct to call Britain a ‘low-tax country’. His commentators attempt to answer this by comparing corporation taxes and OECD figures for the tax burden.

No-one on the thread has yet remarked that if the relevant comparison point is indeed OECD figures for total tax revenue as a percentage of GDP, then Britain clearly could be called a ‘low-tax country’. In 2003, the UK was at 35.6%, which is below the OECD average of 36.3%.

However, I am not sure it is correct to interpret Toynbee’s ‘low-tax country’ as making a simple claim about the UK’s tax burden (that is, tax as a percentage of income) compared to other countries in the world. The fact that Worstall and his commentators contrast the British tax burden with only selected countries like the United States (rather than with average figures), and the fact that dsquared immediately started talking about corporation taxes are both signs of this. The tax burden figure is pretty meaningless without any consideration of population, the distribution of wealth and taxes, the nature of taxation, the benefits received back by the taxpayers, etc. For example, by paying more tax, citizens of a small, rich country can realise some extraordinary social benefits (like the NHS), while citizens of a large, poor country might only provoke a subsistence crisis. What is an overly high tax burden for a poor country might well be an overly low tax burden for Britain (a similar concept lies behind progressive taxation of the rich within Britain, of course).

Toynbee herself questions the conceptualisation of tax in terms of a burden in her very next sentence: ‘Campbell promises to keep the tax “burden” at exactly Labour’s level, while redistributing within it, more from the rich to the poor, and new green taxes.’ Free-market ideologues like Tim Worstall may see tax as an obstacle, but Toynbee clearly sees taxation as an opportunity: ‘nothing is for free, better public services have to be paid for, and only tax buys the things that most people want.’ It seems to me the sort of crude statistical comparison practiced by Worstall and his commentators neither critiques nor confirms Toynbee’s position at all. The point at issue is surely whether British taxes are too low for Britain. The example of other countries can and should be brought into the analysis, but we must be explicit about why we are bringing in those countries and not others.

Tim Worstall has stopped trying to deny the gender gap exists anymore. For the moment, he’s content to attempt to explain it away with reference to (1) women’s choices of career and (2) women having children.

Worstall says that the first is changing, but he doesn’t acknowledge how hard the fight by women to get into new careers has been, nor the importance of trainers and employers in male-dominated occupational sectors taking steps to make their working cultures appealing to the other half of the human species. Moreover, while he notes that women now make up the most of new doctors and new solicitors, he doesn’t acknowledge that their work in those fields might be systematically undervalued to create a glass ceiling effect.

What about childbirth? Well, Worstall once again plays a fast and loose game with the relevant statistics:

The gender gap expands from almost nothing before the likely child bearing years to a quite large one then shrinks again as people become ever older.

According to Worstall, a gap in gross mean hourly earnings of 4.4% for 18 to 21 year olds approximates zero!

Worstall asks whether lower pay during the childbearing years represents ‘an economically rational decision’? Which begs one to ask, decision by whom? Employers make their decisions within occupations and companies constrained by tradition and operating in a market structured by social forces and the state. Discrimination about gender roles and abilities is endemic in that structure. So even if one could rationalise employers’ choices, it would be quite another thing to rationalise those of society as a whole. How is squandering much of the potential productivity of a large sector of your workforce by not providing retraining and sufficiently flexible working hours an economically rational decision? How is leaving so many women chronically poor in their old age a rational social choice?

Worstall does not even try to investigate whether the size of the pay gap is actually proportional to the supposed costs of women’s childbearing to employers. Researchers who do actually attempt to assess the contribution of different factors to the gender gap, rather than merely picking a couple to explain it away, tend to find that only a small amount of the pay gap can be explained with reference to family care. For example, research by Wendy Olsen and Sylvia Walby, Modelling Gender Pay Gaps (Equal Opportunities Commission, 2004) [PDF, 3.8 MB] suggested that only 14% of the British gender gap can be explained as a result of interruptions to work for family care. (Of course, in Timmy Math, 4% is ‘almost nothing’, so I guess he’d only count that as 10%.)

But perhaps a more fundamental logical flaw of Worstall’s view is that there is a deep contradiction between his two reasons for the gender gap. He seems to assume that employers act from ‘economically rational’ (i.e. profit-maximising) motivations, but that as a group (hysterical?) female employees more often act from economically irrational motivations, by failing to choose profitable career paths. But in fact it’s obvious that employers are every bit as capable of failing to maximise their profits as other groups like employees and consumers; indeed, large employers can tolerate inefficiencies on a scale that would be self-destructive in the case of individual workers.

Tim Worstall has stopped merely criticising how the EOC calculates the part-time gender pay gap, and started denying that any gender pay gap exists whatsoever. I wish he would read the excellent ongoing series of posts on the wage gap over at Alas, a Blog by Ampersand (the comments are good too), which would show him that many of his doubts, questions, and objections are extremely familiar to feminists.

I am certainly not going to try to tackle all Worstall’s queries in one post, but I will attempt to refute his recent statistical argument for denial, which (as I understand it) runs as follows. If discrimination were disappearing, we would expect younger women to suffer less of a pay gap then older women. According to the available figures, the gender gap does not appear until after age 30. Therefore we can conclude that the ‘gender pay gap is over, solved’.

Even if it were true, there would still be the matter of society’s debt to all women over 30 who are suffering ongoing injustice. But in fact the naivety of this argument is breathtaking. Look at the pay gaps implied by the very pay figures Worstall uses in the relevant post:

Laughably, Worstall summarises this as: ‘So for those under 30 there is in fact no (noticeable) gender gap in pay, for those in their 30s there is some and for those over 40 a considerable one.’ Perhaps Worstall is now earning so much that he wouldn’t notice if the government deducted another 2% of his current income in tax this year? Not all of us can afford to be so blasé.

Have a think about these figures. If we were to trust Worstall’s assumption that current age-group pay gaps represent mainly historical discrimination, then we would have to conclude not only that the gender gap in wages in 1963–73 was only two thirds that of 1974–83 (which is just conceivably possible), but also that the gender gap tripled between 1984–93 and 1994–2001 (which seems highly implausible). And since 16 to 17 year old girls earn 104.65% of what their male peers earn, we must surely conclude that there was a radical reversal in gender discrimination in the last year alone!

Another point about Worstall’s figures is that whereas the EOC uses mean pay, Worstall uses median pay. Now there’s nothing deliberately deceptive about that. The Government’s Women and Equality Unit also uses median pay. But in this case it does compromise Worstall’s conclusions. The median is excellent at telling you about the most ‘common’ value in a set of numbers because it is less responsive to unusually high values, like so:

As the Women and Equality Unit explain: ‘Mean figures are often not favoured because they can be affected by changes to the earnings of small numbers of very high-earners.’ But this also means that median figures for earnings are relatively blind to elite (male) privilege, to ‘glass ceiling’ effects. When you reconstruct Table 1 with mean pay, things look rather different:

Everyone’s wages are higher, but the gender pay gap is wider and the differences in the gap between age groups are less. Moreover, the implications of Worstall’s assumption about current rates of pay and historical discrimination are rather different this time because 18–21-year-olds are now doing better than 22–29-year-olds.

The better way to track historical alterations in the full-time pay gap is, of course, to compare current data with older data. When we chart such changes from 1998, when ASHE started, to 2005 (see Excel spreadsheet), we find that while the general trend for all age-groups is gradually downwards, the details of the trendlines once again vary significantly depending on whether we use median or mean figures:

Worstall’s assumption about age groups is peculiarly misguided in that feminists would expect a larger pay gap to be visible among older women since discrimination is cumulative, as Ampersand explains:

Discrimination in the workforce is usually is a matter of ‘cumulative causation.’ Among other things, this means that the effects of discrimination add up over a lifetime. So, for example, losing a single job offer or promotion usually won’t make a big difference; but dozens of such small losses over the course of women’s careers eventually add up to a big wage gap.

This is important, because it means we should expect the pay gap between men and women at the start of their careers to be small. The effects of discrimination build up gradually over time, and only becomes sizable once women have been in the job market long enough for the impacts of dozens of individual instances of discrimination to add up. So when … [researchers] look only at the pay gap among young workers, they’ve selected workers who have not yet been in the workforce long enough to have experienced the worse of the pay gap.

Worstall would probably object to this line of thinking, because he seems to believe that those who study the pay gap think the key thing is equal pay for the ‘same job’. But while women may sometimes be paid less for exactly the same job, the debate over equal pay is not, and has never been, limited to such discrimination. It has always been about the devaluation of women and their work within and without the home, about society is structured to restrict their opportunities for their free economic development. The year-on-year failure to properly compensate women for their work produces a cumulative degradation of their quality of life. This is why general figures for pay are relevant, this is why the occupational segregation of women into particular industries and part-time work generally is crucial, and this is why blaming it all on women’s ‘different choices’ is irresponsible. The fairer sex ‘make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like an nightmare on the brains of the living.’

When George Monbiot had the nerve to suggest that maybe Britain’s involvement in India was more guns than roses, Tim Worstall’s reaction was, of course, to accuse him of economic ignorance:

When people are educated like that [learning both the good and bad of historical regimes] (as I pretty much assume all of you darling readers are, aware of all of these things) then perhaps they’d be able to spot what is wrong with this phrase:

(Compare this to Mike Davis’s central finding, that ‘there was no increase in India’s per capita income from 1757 to 1947’, …

Students of economic history will know that that is the normal state of matters. Per capita income has been, over most of the globe for most of history, static. It’s really only since the Industrial Revolution that this has not been true everywhere.

As anyone who’s wrestled with economic questions before the Industrial Revolution (as I have, on occasion) knows, Worstall’s historical claim here is simply false. Fluctuations in population structure and size (e.g. mangled by plagues), the circulation of precious metals (e.g. boosted by new silver mines), the availability of natural resources (e.g. depredation of forests), conditions of war and peace, and other factors, all meant that per capita income was changing all the time. Putting trends, let alone figures, to such changes is extremely difficult given the paucity of evidence before the advent of modern statistics. Nonetheless, some economic historians do attempt to map fluctuations in per capita income before the Industrial Revolution. What they have found contradicts Worstall’s contention that per capita income was static. For example, it is generally thought that on average per capita income grew in Europe, China, and Japan during the high middle ages. I wouldn’t place much weight on exact figures, but in his compilation of statistics for the OECD, The World Economy: Historical Statistics, Angus Maddison used the following: between 1000 and 1500, per capita incomes doubled in Europe, rose by a third in China, increased by slightly less in the rest of Asia, and fell slightly in Africa.

I am not in a position to assess Davis’s conclusion about Indian per capita incomes between 1757 and 1947. But even a cursory glance at the relevant literature shows that it is non-obvious, and that historians have not simply assumed incomes were static. Consider this from the first paragraph of Morris D. Morris, ‘Towards a Reinterpretation of Nineteenth-Century Indian Economic History’, Journal of Economic History 23/4 (1963), 606–18 at 606:

Indian society is one of the most complex in existence, and we know little about its structure, functioning, or — more important — its development and dynamics. The neglect of Indian’s [sic] economic history, particularly the period 1800–1947, is one of the most distressing gaps. It is dismaying to realize that even within very broad ranges of error we do not know whether during the past century-and-a-half the economy’s perfomance improved, stagnated, or actually declined.¹

¹This is true whether we attempt to measure performance in terms of per capita income or by any reasonable combination of qualitative-quantitative elements.

Presumably, Alan Heston would be particularly annoyed by Worstall’s glib approach, since in 1983 he was arguing that Indian per capita incomes rose between by over 30 per cent in 1871–1911 before stagnating for the rest of the colonial period (a view treated with scepticism by B. R. Tomlinson, The Economy of Modern India, 1860—1970 (Cambridge, 1992), 7).

Worstall’s assumption that India’s stagnation under the Raj was typical of the preindustrial age is wrong, but not as wrong as his apparent belief that this would somehow excuse or explain India’s stagnation under British rule. What does he think all those Brits were doing there in the first place? They were either trying to help, or they were trying to exploit (in all fairness, it was probably a mixture of both). As D. A. Washbrook puts it (‘Progress and Problems: South Asian Economic and Social History c. 1720–1860’, Modern Asian Studies, 22/1 (1988), 57–96 at 78):

… a very strong prima facie case can be made that, especially between the 1820s and 1850s, British rule restructed South Asian society and economy in ways meant to serve its own interests and which had the consequence of all but permanently precluding the transformation to modern industrialization. It was in this era that many of the social and economic features, understood by later generations to be products of changeless tradition and taken by them to constitute the barriers of ‘backwardness’ to development, can be seen to have crystallized.

Of course, you can join Andrew Roberts and Niall Ferguson in challenging or moderating this view but you cannot simply shrug your shoulders and pretend it would have been the same if Britain had not reduced India to colonial status. Worstall’s dismissive treatment of Monbiot’s article ignores Davis’s contention that the British elites sequestered Indian food production for British use, often leaving the natives starving. And this is only an extreme example of how India’s productivity arguably went into sustaining Britain’s meteoric rise, rather than being reinvested in India.