Realist, not conformist analysis of the latest financial, business and political news

Entrepreneurs, Mothers, Children – This Is Prejudice Or Reality?

It is possible that having children, becoming a mother, is simply something that happens in life and that doesn’t then affect nor influence other parts of that same passage from cradle to grave. It is also possible that it is an event that changes attitudes, aptitudes and desires. This would appear to be an empirical question, not something we either should or even can have an ideological commitment to or view of.

That isn’t how it works of course. Instead just about everyone has that prejudice well on display and near no one stops and asks, well?

Which is the starting point for this:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The daughter of one of Britain’s richest men has launched a searing attack on gender inequality in business, accusing bankers of creating a “toxic culture” for women. Shanu Hinduja, whose father, Sri, and uncle Gopi, topped The Sunday Times Rich List last week with a fortune of £22bn, said female entrepreneurs were frozen out by a “deeply patriarchal” system that often refused to fund their ventures. She added that mothers were particularly penalised as many male investors doubted they would focus fully on their work when they had a young family. [/perfectpullquote]

We’re back to our old economists’ distinction between taste and rational discrimination:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]She said the industry was still “deeply patriarchal” and remained “off-limits” to women, adding: “It remains widely accepted among investors that women — especially those of childbearing age — aren’t going to give their business ideas their full efforts and attention.”[/perfectpullquote]

The question being, well, not should it be true, not should they think that even, but is it true that mothers of young children focus a little less on their brand spanking new business adventure?

My own reading would be, on average, yes. This doesn’t tell us anything at all about any specific individual, it just tells us something about the distribution of desires across the population. We really do find that fathers make more than non-fathers, mothers less than non-mothers. These two points alone are enough to describe the entirety of the observed gender pay gap.

So, if it is in fact true that women with children aren’t quite as committed – on average – then what is the investor supposed to do? Ignore reality?

Which is, as Gary Becker pointed out, the great joy of a market based system. Whatever your prejudices once you start interacting with that reality out there it’s going to come bite you on the bum. If it is just simple prejudice then investors who succumb to it are going to make less money than those who don’t – the solution is in the system. And if it isn’t prejudice but just that reality then we might not like the message we’re getting but that is, well, you know, that’s just reality, isn’t it?

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Leo Savantt
Leo Savantt
4 years ago

Considering the requirement to focus on a single objective to succeed as an entrepreneur perhaps it could it be that more there are more obsessive men than women and therefore more men are entrepreneurs?

To put it another way perhaps there are more women with greater degrees of emotional intelligence, who are then more likely to want to lead a more balanced and well rounded life, which includes family and friends leading to little time for entrepreneurship?

James Bayley
James Bayley
4 years ago

Markets that do not include external costs can be efficient at the level of the market participants but not for the market as a whole. Unfortunately for small government types like us “rational discrimination” has external costs: Consider the scenario where it was true that any person whose surname began with W was 50% more likely to be incompetent than other workers. A rational employer would never interview any Ws. The external cost of this is that Ws would not bother going to university and becoming economists. Both employers and employees are behaving rationally but their rational behaviour reduces overall… Read more »

4 years ago
Reply to  James Bayley

Well, this W at least isn’t an economist. But someone who was, Gary Becker, sorted out the next stage of this. The Ws are now cheap to hire as no one will interview them. At which point the rationally discriminating employer does interview them, sorts through the 50% duffers and employs the other for cheap. Makes a fortune out of the taste discrimination of the fools.

We’ve an actual example too – Dame Stephanie Shirley and FI Group.

No legislation needed.

James Bayley
James Bayley
4 years ago
Reply to  timworstall

Your counter-example does not address the existence of the external cost and therefore gets the same answer as before.

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