Saturday, February 20, 2016

THE PINK "TAX": Why Women Pay Higher Prices for the "Same" Products

By John Dotson

These days it seems that everything in our lives revolves around taxes. Taxation has always caused problems. Taxes distort the structure of production and the price system reducing the real wealth of society.

Yet not everything that people consider a “tax” is indeed a tax. A tax is something that a person is forced to pay, under threat of punishment, by the government. This does not include what has become known as the “pink tax.” The pink tax is the notion that women pay more than men for products that are female-oriented. For example, those who believe in the pink tax often claim that women pay more than men for razors, and that these women’s razors are the same product as men’s razors.

Men and Women Are Not Identical

When discussing the pink tax, we can dispense with the notion that women pay more money for exactly the same products that men use. In order for goods to be identical, the two products must be viewed as homogenous units by the consumers themselves.

Clearly this is not the case, and hygiene products — even ones designed to do similar things — are viewed differently by men and women. First of all, men’s and women’s products generally smell different from one another. This fact alone is enough to distinguish them as separate products if the sexes treat the products differently.

Moreover, in terms of physical amenities, men’s and women’s razors are different in a number of ways. As indicated here, women’s razors are often larger and have more stuff around the blades to help women shave a larger area.

Women pay more for dry cleaning and haircuts. This is partially due to the fact that women’s dry cleaning and women’s haircuts takes more time, and is more labor intensive. More importantly, female consumers of dry cleaning are willing to voluntarily pay the higher prices. But these facts haven’t stopped some from calling for a federal law outlawing differences in prices.

Perhaps the largest “injustice” related to the pink tax is the fact that women often pay more for health insurance. As pointed out here, however, women are more likely to have chronic health conditions. And, as studies suggest, women use health care services differently than men.

Prices Are Not Arbitrary

The cost of producing a good will affect the price, but ultimately, how the goods are valued, relies on the subjective valuations of the consumers. This valuation manifests itself in the form of objective money prices, and it is the consumers who actually determine what products are on the market, and what the price of these consumer products will be.

In the case of hygiene products, it must be remembered that men and women have different standards of hygiene leading to very different demand curves.

Thus, prices in a functioning market will be set at the point where the aggregation of the supply and the demand schedules intersect. That is, it will be set at the level where both sellers and buyers can agree to voluntarily exchange money for the goods.

Companies must set the price as close to this equilibrium price as possible because above this price the company will have a surplus of product to sell, and if it is below this price the company will have shortages, causing a loss in revenue. This works for whole industries too; if suppliers of women’s products are actually charging a higher price for an identical product, and reaping profits, then other firms will start producing women’s products, thus increasing supply and, ceteris paribus, drive prices down.

By continuing to buy differently priced goods for men and women, the consumers have indicated that they think there is nothing wrong with there being price differentials between men’s and women’s products. On the contrary, this “price discrimination” is achieving the most efficient distribution of goods to those who value them the most. If the two different products were truly the same, then women would simply buy the male version of the products.

Moreover, nobody forces these women to pay more for the products they purchase. These products reflect what a woman deems as her most preferred product on the market with given prices. In an unhampered market there are no correct or incorrect prices. There are only the prices that people freely choose to pay. To believe that women only buy women’s products that are identical to men’s due to clever advertising campaigns would be to assume that women have no brains and can be endlessly manipulated by firms. If this where the case, why would companies not just raise their prices for all products and shift most of their funds to advertising?

This Is Not About Equality

Supporters for abolishing the nonexistent pink tax do so under a fa├žade of “equality,” and many groups who believe in the pink tax advocate for legislative action to force companies to lower the price of women’s products so they are equal to prices charged for men’s products. This is nothing more than a form of price control, which as shown here, eventually leads to very bad things.

The above originally appeared at Mises.org.

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