Assume that women live longer than men on average. Suppose an employer hires men
ID: 1108412 • Letter: A
Question
Assume that women live longer than men on average. Suppose an employer hires men and women, pays them the same wage for the same job, and contributes an equal amount per person toward a pension. However, the promised monthly pension after retirement is smaller for women than for men because the pension funds for them have to last longer on average. According to the Supreme Court, the above employer would be guilty of discrimination because of the unequal monthly pension benefits after retirement. Analyze the economic effects of the Supreme Court ruling outlawing these pension differences.
Explanation / Answer
The firms decided to keep the pension amount lower for women so that the pension can last for more years in case of women as life expectancy of women is more than men. If same amount is paid to both men and women then the average amount paid to women will be more as compared to men, this will increase the overall cost of pension amount for the company. By lowering the amount paid to women the firm can cover the cost more effectively without lowering their profits. Thus, economically this is not a matter of discrimination for the employer.