The Pink Tax Hoax

The Pink Tax Hoax

Baby I’ll spill the facts
Well honey it ain’t your money
‘Cause baby I got plenty of that
I love you for your pink Cadillac.

– Bruce Springsteen

If you’ve ever admired the gal who managed to steal The Boss’s heart with her pink Cadillac, be advised — even she is a victim.  That’s because she probably paid too much for her sassy car, according to State Senator Hannah-Beth Jackson (D-Santa Barbara).  Her bill SB 873 aims to end the so-called “pink tax” — a claim that women pay more than men for similar products. The props at Senator Jackson’s presser included a pair of girl’s pink sneakers ($60) compared to a  boy’s ($45); a pink teddy bear ($14.99) compared to a blue teddy ($12.99); and a female razor ($12.59) versus a male razor ($11.90).

While it’s more attention-grabbing and sexier (pun intended) to blame gender discrimination for the cases above, sound economics and common sense easily explain the price differences between male and female-marketed products.

First and most obvious, are the products, in fact, different?  Design, availability of materials, and labor costs are just some of the many factors that go into pricing products.  Companies could be facing a flurry of costly lawsuits to defend the price differences of everything from razors to hair products to sunglasses.  The California Chamber of Commerce calls this bill a “job killer” because of the increased litigation it would produce.

Second are the subjective factors. “Economic value is always, in the end, subjective,” writes Steve Horwitz of the Foundation for Economic Education (FEE). “Things are valuable to us because we believe, for whatever reason, that they will contribute to the satisfaction of our various ends. So perhaps women are willing to pay more for a particular cosmetic product because they have a strong preference for how it smells, or some other feature of the good that does not matter as much to men,” Horwitz explains.

Third, is the concept of price discrimination. “The economic definition of price discrimination is selling the identical product to different people at different prices that are not related to cost,” writes Horwitz. Happy Hour food and drink discounts and advance purchase of airline tickets are just some examples.  People find this practice acceptable because it allows more people to buy the product.  I might be willing to pay $40,000 for a pink Cadillac, but Tim Anaya — not so much.  On the other hand, he might be persuaded to gift one to his mother at $10,000.  As Horwitz points out, “Is this a pink tax or a blue discount?”

Finally, the underlying assumption of Senator Jackson’s bill is that women aren’t savvy shoppers and are the victims of gender bias and greedy marketers.  But according to a Bloomberg survey, women make more than 85 percent of the consumer purchases in the U.S. and influence 95 percent of the total goods and services purchased.  Moreover, women are considered more sophisticated shoppers and take longer to make buying decisions.  It’s no wonder that marketers are falling over each other trying to understand what women want to buy and how much they want to pay for it.

Clearly, when it comes to shopping, women are in the driver’s seat – pink Cadillac or blue.

Rowena Itchon is senior vice president of the Pacific Research Institute.  

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.