2019 has been quite a particular year for feminism. From the general Women Strike that reunited hundreds of thousands of people around Switzerland to many international movements exposing abuse and sexism, inequality between men and women is now at the forefront of many debates.
One of the controversial examples of sexism is the pink tax, the discriminating fact that a product branded “for women” is usually sold at a more expensive price than the exact same product branded “for men”. But what exactly is this tax, which statistical evidences support this claim and how could such inequality exist in FMCG-type markets?
An extensive and comprehensive study has been conducted on this tax in New York City, by request of the mayor Bill de Blasio. The commissioner, Julie Menin, analysed nearly 800 common fast-moving consumer goods across different sectors, comparing the price of analogue products. The findings were astonishing: on average, products branded for women were priced 7% higher than products for men, with significant disparities between categories of products:
7% for toys and accessories
4% for children’s clothing
8% for adult’s clothing
13% for personal care products
8% for senior and home health care products
One may argue that products for women are, on average, of better quality, or with more prominent and costly marketing, explaining their higher prices. However, these results already take this into account, as the study took several control variables to reduce omitted-variable bias, such as branding, ingredients, appearance, textile, construction and marketing.
As a result, these findings only represent the unexplained part of the price difference between gender-targeted products. Women are paying more for the same products, without any proper reason, but how could such phenomena be possible?
These findings are impossible under perfect competition theory. Indeed, abnormally high prices and profits should result in more companies entering the market to sell the same goods, driving prices down to normal heights. Under the above-mentioned econometric evidences, we could only conclude that FMCG markets allowing such abnormal profits suffer from other kinds of problems.
Let’s have a look on the personal care products, the “worst” industry in terms of pink tax. This category price premium was analysed through different types of product, with very diverse results:
48% for shampoos and conditioners
11% for razors and razors cartridges
11% for lotions
3% for deodorant
– 4% for shaving creams (men are actually paying more on this specific product)
How could such products be priced that high? The answer lies on the market share of producing companies:
On this report by Euromonitor International, we can see that the razor business is hugely dominated by a few brands. Though it only concerns men’s razors, the market shares are similar for women’s razors. These results can also be observed on the shampoo business:
This becomes even more apparent when we start considering companies instead of brands:
Procter & Gamble: Head & Shoulder, Pantene (24% market share)
Johnson & Johnson: Le Petit Marseillais (7% market share)
The shampoo and razors business are highly dominated by a few companies, making them oligopoly-driven markets. While there seems to be no empirical studies on the relation between the pink tax and market competition, one could only assume that there is a correlation between oligopolies and pink taxes.
Many economists debated on whether oligopolistic structures were market failures or not, but in this case the result is clear: statistical evidences show abnormally high prices and profits targeting women on specific FMCG oligopolistic markets, which is undoubtedly a market failure.
How could we resolve the pink tax issue?
The answer to this question is not simple. However, based on the above-mentioned elements, a good way to tackle the pink tax would be to act on market structure to enhance a more competition-driven market. While this is far from being simple, it would directly hit what seems to be the underlying reason behind the pink tax.
Obviously, more studies need to be done on the pink tax before requesting such enormous institutional change. First of all, we need to understand the relation between market structure and pink taxes, and see if some perfect-competition markets also have the pink tax. Second of all, we need to see if a change in competition has an effect on women-targeted abnormal profits. Finally, we need to assess the best ways to reduce oligopolistic tendencies of some FMCG markets.
For the moment, one can merely observe the existence of the pink tax, but there is a lack of understanding of the underlying causes, deeply rooted in our society, that needs to be studied.