The major lamentation over women’s slide into the workforce has been the number of jobs taken from men. Underlying all of that is the structural shift from the private to the public sector and from manufacturing to service based economies; both trends favor female employment.
But even if those are plausible issues for male concern, there is another issue with female upward mobility that is of consequence to the whole economy (local, national, global).
Women don’t create jobs.
Besides becoming more omnipresent in the workforce, women are taking on more upper management, consulting, and “50,000 foot view” strategic roles. The latter group are of most importance here as they deal more with large-scale risk implementation and capital deployment – the main thrust behind new products, new markets, and new jobs. Not only are women more than half of the U.S.’s workforce, they comprise a near supermajority in college attendance. Affirmative action type policies and general wailing for diversity have forced women up through the glass ceiling into these upper management positions whether they display merit or not. In Norway and France, policy dictates that 40% of a corporation’s upper management must be female. In business, one prospers by adhering to the mantra: “Don’t be France.”
In economics, the most important decision-making factors are opportunity costs and tradeoffs. A woman taking a man’s job on a production line has no reverberating consequences for anyone besides the man and his family (my examples are deliberately simplistic) – the opportunity cost is the same whether the gender is switched. But a woman taking a role in these high-level strategic positions – by the more sinister “invisible hand” of equality – has unseen opportunity costs arising from the differences in each gender’s nature: one more woman in the boardroom costs a man a boardroom job (which is a moot point) and perhaps a few other people jobs lower down the ladder. How so?
Job creation stems from “creative destruction”, innovation, and technology development which all stem from risk. I’ll preemptively put one argument to rest that I see springing up: innovation and technology do create jobs. It’s true that corporate men destroy jobs and green light endeavors that quickly fizzle out, but on the whole and in the long run, risk-taking men create a net benefit in the job market. The poor economic showing of the past decade is a bump in the otherwise long-trending trajectory of quality of life improvement.
My discussion of Baumeister last week underscores the dichotomy between male and female risk-aversion. Men have innately developed low risk aversion out of necessity. The men who passed on their genes engaged in riskier behavior and succeeded at higher rates than men of genetic inconsequentiality.
On the flip side, women are more conservative than men. This is biologically and behaviorally true. A woman is not only less likely to use drugs or go sky-diving, she is also less likely to engage in financial risk. In organizations with an AA infused feminine influence, risk will be lower, but so will return. Jobs may be preserved, but even more jobs will not be created. This is the important unseen tradeoff.
There are even more resounding knock-on effects to women’s unmerited infiltration of the boardroom. As more and more women sneak through the cracks of the glass ceiling, the competitive nature of industry that has led to massive job creation in the past will have compounding effects. Not only will an individual company take on a less risky strategy, the fact that it is up against less risky competitors who have followed the AA/PC path implies that the whole industry will be less risky all together. Lower levels of risk imply lower levels of innovation and job growth for the whole economy in the future. The problem is that we won’t notice the effects because we won’t know what the tradeoff scenario would have brought.
To make a quick example, the computer chips of Intel and AMD would be of lower quality and more expensive if one or the other company didn’t exist. Each company took on risk because they had to develop smaller, faster, and cheaper chips in order to stay abreast of their competition. The innovating drive for Intel was spurred by the chip developments and risk-taking of AMD. We can apply this concept to the risk-aversion of upper management. Depleting the level of risk taken on by one company affects not only that company but companies in similar industries. The lower levels of competition, over time, lead to less highly developed markets and products. More highly developed markets with higher levels of technology and cheaper products create more jobs and higher qualities of life for a nation.
Supporting this hypothesis, research at the London School of Economics showed that companies with higher ratios of female boardmembers have poorer financial performance. The research points out that, while women do their jobs very well, they tend to take on corporate governance roles that stifle growth. The females not only bring their singular risk-averse vote, their influence decreases the risk-taking of other members of the board.
Dr Ferreira said: ‘Women directors appear to have a significant impact on the governance of companies. However, it is not necessarily that the women on the board are doing all the monitoring. The behaviour of the board as a whole is affected by increased diversity.’
Decreased risk may be a sweet song to some, but risk-taking is the lifeblood of our businesses and our culture. Especially for companies that are already reasonably well-governed, this extra red tape (on top of the red tape strewn about by the government) stifles creativity, innovation, risk, profit, and job growth.
If a woman enters the boardroom because she has proven that she has a good grasp on the risk/reward profile that the company embodies (i.e. the same track on which a man has to prove himself), she rightfully deserves her place. But if a woman enters said boardroom because some external pressure compels the boardroom gatekeepers to let her in, and this same policy is administered in boardrooms across the nation, female admittance implies worse financial performance, anemic job growth, and less-than-optimal quality of life. As with most governmental or socially structured dictates, inefficiencies arise. In the past, men have been mostly concerned with the primary effects of women in the workforce: men’s focus was on their replacement by females and the capitulation of the breadwinner role. But if we look a few steps further and a couple of levels above us, we’ll see that womens’ decisions in the boardroom have amplified effects on the millions of men and women down below them.
Chuck Ross holds a Master’s of Economics. He blogs daily at Gucci Little Piggy and works 5 shifts a week at a local Italian joint.
