First published in The Australian on 18 January 2013.

By: Adam Creighton

CALLS for quotas for Asians on company boards and in the upper echelons of the public service to provide us with “Asian perspectives” would provoke ridicule.

Yet the same sorts of arguments motivate the depressingly fashionable trend towards quotas for women in the workforce. Since 2011 both the government and the Australian stock exchange have introduced rules requiring companies to encourage greater female representation at the executive level, but stopped short of recommending hard quotas.

The public service has gone further. Treasury wants women to make up 35 per cent of its senior staff by 2016, and the Reserve Bank has considered ensuring women fill 40 per cent of its senior ranks, despite a review showing no bias against women in promotion given their experience.

Quotas are a tax on personal characteristics, a clumsy redistribution of jobs away from supposedly advantaged groups to the apparently needy. They retard the normal functioning of the labour market, impairing productivity by constraining firms’ or public servants’ ability to choose the most competent men or women for the job.

Associated “diversity policies”, which 98 per cent of publicly listed Australian companies now have, bog managers down in costly paperwork and distract boards from running companies in shareholders’ best interests.

Such policies are an indulgence: if smaller businesses are ever subject to them they will go broke or shut down.

Since 2006 the Norwegian government has mandated that 40 per cent of publicly listed company boards be made up of women. A University of Michigan study from 2010 showed that the impost destroyed value, as boards were forced to promote less qualified people. Sharemarket values fell up to 5 per cent after the announcement of quotas.

If male managers had been egregiously hampering the careers of their sufficiently qualified female colleagues, such sharemarket falls would not have been observed.

“The constraint led firms to recruit women board members that were younger and had different career experiences than the existing directors,” the authors said. Countless examples, from the Prime Minister to Gail Kelly at Westpac, show women succeed without artificial quotas.

Australia’s most renowned female economist, professor Helen Hughes, earlier this week called them an “insult”. They subtly undermine women’s credibility by implying they cannot get ahead without assistance, while generating resentment among men.

The Norwegian experiment highlights another unintended consequence. Quotas bolster the chances of promotion for women already within striking distance, but without swelling their ranks commensurately.

Women directors in Norway, known as the “golden skirts”, have leveraged their legal clout to vacuum up multiple board positions. They comprise a smaller fraction of total executives than 40 per cent because individuals can hold more than one directorship. In 2010, some women were sitting on more than 16 boards!

Women might only make up 10 per cent of executives in Australia, around the same fraction as in Norway before the quotas began, but so what? Many women eschew management roles to look after children.

In any case, less superficial analysis would suggest other groups would be more deserving of help if redressing underrepresentation or unfair discrimination were really the aim.

Ethnic minorities, Aborigines, or people from working-class high schools, for instance, are likely to be more underrepresented in the boardroom than women, and are as likely to have “unique perspectives”. Should government introduce quotas for these groups too?

Women’s best protection against discrimination is not arbitrary government meddling but the free market. Capitalism has been a great liberator of women because it values the effort and ability of individuals regardless of economically irrelevant personal characteristics.

Firms that hire and promote based on criteria other than suitability retard their own productivity. And promoting public servants based even partly on gender undermines the sector’s appeal to men. The public service’s embrace of “diversity” may explain why women make up almost 60 per cent of its ranks.

Cutting income tax rates would be a far better way to help women. Many choose not to work because losing welfare benefits gives an effective marginal tax rate of more than 60 per cent.