How do people justify earning more than others?
bbc.co.uk
bbc.co.uk
We live in a society where individuals are mostly free to negotiate salary and compensation with whoever they choose to work for, and employers are in turn free to negotiate with who they want to employ.
The actual compensation then comes down to a mixture of supply, demand and negotiation skills. This can often lead to "unfair" outcomes - but we've found that alternative systems in which prices and wages are externally regulated result in everyone being worse off.
Why is this so? It is not so much to do with how hard people work, but how much risk-takers are compensated for taking on risk. If risk takers aren't adequately compensated (and for sure, part of what they are risking is the time they are spending), it becomes irrational for anyone to take on the risk, and so no-one does. Then, everyone is worse off.
To give a concrete (but arguably overly simplified) example: During the industrial revolution, there were lots of different attempts at making more efficient steam engines. It wasn't possible to know up front which designs were going to work and which weren't. But people were motivated to try lots of different things, because they knew that if they succeeded, all of the time and money spent researching each failed attempt would be more than paid for once they succeeded. Without that compensation though, it doesn't make sense to even try, leaving everyone with the inefficient steam engines.
In a system of equal wages you'd still get paid for developing your steam engine even if it didn't work - the safety net means that engineers won't have to take a risk (beyond wasted materials) in order to develop new designs. You'd need a central bureacracy [which is the problem] so you could apply to a group akin to the InstMechEng and they would asign finances for your project or not (or you could self-finance if the costs weren't too high).
It also however means that when they make the new design everyone can benefit rather than just them. For sure, some people will consider it only worth working to improve things for themselves and so refuse to work to make new engineering advances.
A better example you could give IMO would be something like coal miners. "No one would want to work in a coal mine, as it's high risk, if the reward is the same as working in an office as that's low risk.". I don't think it's true, some people will still want to work manually, despite the risk - people take risks for pleasure so the economics are far more complicated than "people only take risk if there's greater financial compensation".
It's a source of sadness for me that one might feel the only reason to do something is to have more than other people rather than to give more, to make everyone's world better. Greed is hard to combat, I certainly haven't managed that, but it's not the only motivation to work.
Fear similarly so.
In a system of equal wages the supply of coal miners would dry up because no one will risk their life doing backbreaking labor when there are much more safe opportunities out there.
Building, farming, construction, mining ... no one chooses to do these jobs because there are safer jobs available?
Can I ask, what motivates you to perform your particular functions in society, is it only the financial reward?
Re "taking risk for pleasure": I would need to adapt my argument to start talking about corporations and not individuals, for one thing. I think it's probably more important (for economic efficiency) that large-ish corporations are compensated for taking on risk than individuals. Corporations have a duty to their shareholders to not take risks without commensurate compensation.
It gets complicated quickly...
The key point I wanted to make was that there is a good justification for inequality, and it's about economic efficiency, not just what people think they deserve. As you have done, you can also still argue against inequality while keeping economic efficiency (by introducing concepts as social safety net, centrally planned R&D)... That's a whole other debate which unfortunately was also not really made in the article.
It's more than a problem - you couldn't implement such a system without a totalitarian state.
"It's a source of sadness for me"
It's a source of sadness for me that you haven't thought through the details of your plan to "make everyone's world better".
Are you saying you do ascribe to this position, that your only motivation to work is to get more money (and by extension luxuries) than everyone else has?
My plan, which I haven't mentioned is to guard against my own tendency towards greed and basically follow Ghandi's maxim of "being the change you want to see in the world". Do you have specific objections to that plan?
No. I never said anything like that, and you are arguing dishonestly.
(For the sake of other readers: the goal of work is to achieve eudaimonia, productive happiness. The false dichotomy between "material greed" and "spiritual self-sacrifice" causes massive and unnecessary misery. See the books in my profile for details).
"Do you have specific objections to that plan?"
The change you said you wanted to see in the world was everyone earning the same wage. Here's a specific objection: let's say I'm a plumber living in your utopia, and some of my neighbours complain that InstPlumbing is often slow fixing their pipes. Though it's a fair bit of work, I'm willing to do it myself in exchange for a few of their hoarded dollars (or cigarettes, or whatever), which I later barter for extra bread rations for my kids. Whoops, now I'm earning more than other plumbers and we have inequality again.
Should I be banned from performing this greedy, selfish activity? And how are you going to stop people from engaging in such voluntary trades without totalitarian surveillance?
The salary of people higher up in an organisation is not higher because they are so brilliant; it's higher because these people can decide how to distribute the money.
This is true in all areas of the economy. People who are close to the money will always make more than people who do the work. A realtor will earn a lot more from the sale of a home than the plumber who laid the pipes. The outsourcing agency will earn significantly more than the workers who end up doing the job. Temp agencies have a markup of more than 100% on the salary of their temporary workers.
All that talk about "negotiation skills" and "compensation for risk" is just bullshit that people tell themselves to justify a higher salary. Why is it so hard for people to accept that they are lucky to earn so much? Why do people always have to find an excuse why it's only fair that they earn more than others?
We're all grown ups, we all know that the world isn't fair. There's no need to come up with elaborate explanations why pay inequality is a good thing.
Because we get accusatory comments from people, and people demand "justification" from us. When you blame/accuse people, they go on the defensive and start trying to justify it to you, and I guess to themselves as well if they internalize the blame.
You made one valid critique of what I said: I agree with you that many (maybe even most) "ridiculously rich" people probably benefited from nepotism, crony-ism and general corruption. There are plenty of examples in non-capitalist societies too (Soviet Russia, Venezuela, Cuba).
Similarly, if you have a job, the money your employer gives you is now your money. If you have a business, the money your customers give you is now your money.
It's true that someone making £60k a year probably works harder, with more responsibility, and has invested more up-front in their own skills than someone making £20k a year. However this shouldn't be used as the justification for their higher salary; the justification has to be that freedom and property rights are inviolate principles.
If you cede those principles -- e.g., by conceding that hedge fund traders and CEOs cannot possibly be "worth" their high salaries, and so they should not be permitted their salaries, and so they and their employers do not have a right to their own money -- you effectively give free reign to the government to interfere with any economic transaction in the name of "fairness" or "justice".
5% of population is working on really groundbreaking stuff. We are just lucky we are in demand but our time will come as well and then those Senior Software Engineers that brag about how they are rich and successful will be useless once again.
95% of software is pure s...t so please show some respect.
The more I work in IT and meet more people the more I appreciate "normal workers" that take care of our stomachs,clothing,trash and so on.
I don't think anyone is saying we're better people. Programming - even basic programming - is harder than driving a car.
It's pure capitalism I get it. I like capitalism okay ? I live in a socialist corrupt hellhole.
Even if it's harder that does not mean it's more useful than to drive car properly.
That's why the rich countries are outsourcing to cheaper countries so much.
How do you justify 150k salary in US vs 25k salary in India ? Different costs of living ? Yes and no. In many poor countries some stuff is just more expensive than in the richer ones.
Someone considering that they deserve the same as someone else for doing and easier job is a kind of entitlement. I'd like to see someone justify that.
I'd like to see someone provide a reason why anyone would pick the "harder" jobs if they were paid the same.
If I could choose between a job digging and filling holes all day or a job where all I do is play video games - I'm not sure many holes would be dug. Extend this to hundreds of "easy" jobs and hundreds of "hard" jobs and it makes one wonder how many jobs requiring physical or repetitive labor wouldn't exist.
It's more useful TO THE BUYER. That's why the buyer TRADES MORE MONEY for it.
No one cares what third parties think about "value" or "difficulty" or "justification".
What people are willing to work for.
If nobody in India was willing to do the job for $25k annual salary - they would need to be offered more to do the job. Flat out, that simple. It turns out that there are many people willing to do the job for the lower pay - because it beats other options available to them.
On the other side of the coin - fewer people would take the job in the U.S if it wasn't $150k/yr salary. They'd walk to another offer that they feel is worth their time because the offer doesn't beat other options available to them.
This is not remotely true at all.
It would be interesting to make a list of white and blue collar jobs where you pair professions with the same pay level.
mopping the floor -- office secretary
plummber -- wordpress
etc
I see it as simple as: I wanted X, I was offered X-10%, we settled on X-5%. I don't need to justify anything, to anyone.
Or, if you are an entrepreneur, your earnings are derived from organizing and selling the work of others. Again, what other justification exists, apart from "this many people wanted to pay me this price, those guys said they would do it for me at a smaller price, and I kept the difference."
You should be required to try to convince someone working three manual labor jobs and making $40k a year that your $150k salary for making CRUD apps in your underwear is morally justifiable.
Imagine a shirt that sells for $20 on the market. The shirt is composed of $5 from raw materials and depreciated tools and $15 from your transformative labor. The boss pays you $5 for your work and makes off with $10. The boss steals way more than their investment. They'll tell you (e.g. Paul Pester from the article) that they have more responsibility: this is a bold-faced lie. Corporations are never held responsible for the havoc they wreak on society and the Earth.
The result of this arrangement is the obvious wealth inequality graphs that we've all seen. This is the true injustice. The CRUD worker making $150k and the food laborer making $40k are fighting for scraps. We should focus our fighting upwards.
So no, I wouldn't call it "stealing", rather an exchange that is not immediately obvious because it's not entirely monetary/transactional in nature.
Wages aren't a hierarchy, they're supply and demand. The only reason why someone earning 150k would have to justify their wage to someone earning 50k is if the person earning 50k wasn't afforded the same opportunities as the person earning 150k.
You just pushed the blame off to the market, which needs the exact same moral justification.
But yes, sure! The employers are the oppressed class. All of us plebeians are so ungrateful of their estate inheritance -- er, brave risks. But don't worry for them! They can hire "domestic workers" to dry their tears with million dollar banknotes.
I don't see how it "misses the point" by not taking into account that you don't believe you need to justify your salary.
> He says they start work as early as 04:45 and finish as late as 01:30, working eight-hour shifts in a "small metal box underground" - conditions he says would be considered "cruel and unusual punishment" in other circumstances.
And yet whenever LU try to automate them they go on strike. Guess it can't be that bad after all. I wonder if he can say "hypocrite"...
There could perhaps be some way of bringing in automation, moving existing employees into different roles for the remainder of their careers and therefore satisfying both aims.
Instead, from the outside, the tube unions seem to go on strike every other month. I don't see my water, gas, electricity or internet connections being switched off because workers at those companies are striking. Tube workers seem more than happy to inflict financial damage and inconvenience on the other 8 million people who live in London and who depend on them. Apparently they don't care that their actions are likely to be having a much more damaging impact on those Londoners on average salaries (as well as the large numbers on below average salaries).
I know someone on the breadline who works all hours and makes an absolute pittance. One day of not being able to go to work for someone in such a situation can literally risk their job, rent and ability to feed themselves.
I find the actions of the - by comparison wealthy - Tube unions generally disgraceful.
The real challenge is finding someone who thinks that their industry should be paid less in general - every industry thinks it's undervalued.
Hence, it's not hypocritical to say that bad conditions justify a high pay; whilst also considering the overall conditions/pay balance to be good, and hence worth striking over.
Am I entitled to a higher pay? No! But I have spent the last X years NOT earning an income. The longer you are working to amass a certain skill set the longer you defer income you could have earned. It would be nice to recoup that.
Not everyone can do what I (and my fellow) peers can do and thus we have some sort of leverage in an interview. I demand X, they offer Y and then I can negotiate because I have certain skills they want. If they want skill set Z and there are 100 people lining up in front of the building with exactly the same skill set they can just say find the first person that agrees to their abhorrent demands.
Does a higher education make you entitled to a higher pay? No. It's all about supply and demand.
This post has become kind of ranty, long, and unstructured. Sorry.
I remember an anecdotal story told in a social psychology class (sadly many many years ago) where a psychologist is annoyed with some kids playing in their yard. So instead of telling them to stop he/she pays them each a quarter ($0.25) and tells them if you come back tomorrow I will pay you $0.50 to play in the yard. The kids do and he repeats his promise but raises the pay to a $1.00. The kids come and the psychologist pays them. The final day the kids come but the psychologist tells the kids he is all out of money..... What do the kids do?
They stop playing in the yard. Something they did for free they are not willing to do anymore because they are no longer paid.
Sadly I can't remember what theory the anecdote was teaching (maybe consistency theory?).
__________
Even more bizarrely, if for some reason people believe you're doing "nothing" they rapidly switch to projecting their expectations of what doing nothing means to them.
In the end, it's just hard for people to understand that some people are different than them and the answer is not to suggest everyone be the same.
Actors acting in their interest to maximize happiness and well-being is the basis of all modern non-Marxist economies, and every metric related to those goals shows that this albeit-non-perfect-system works pretty damn good.
There really isn't any point in rehashing the 160yo Marxism v. Capitalism argument here, I know, but there is almost zero evidence that in a wildly diversified and large society (not Sweden or Denmark, for example), that a government-controlled economy can bring happiness and well-being to its people.
As far as I remember Germany has 1/3rd of the population of the US – and a social democracy very similar to Denmark or Sweden. And Germany has large immigrant populations as well.
Could you explain why this concept can work with 80 million people in Germany, but not, say, the 40 million people living in California?
The US has a plenty of "safety-net socialism" as well, so I'm not sure of your point you are making about CA..a country that almost doubles its national debt ($12t to $20t) in only 8 years is surely doing its best to provide for its people, no?
For how many generations is that possible before the country bankrupts itself?
That’s not true.
The current influx of foreigners is about an order of magnitude smaller than the influx of foreigners from Turkey during the 70s.
So the question should not be how do you justify earning it but just how much can you justify keeping it?
Kind of lefty, I know, but it's Friday :)
[1] http://www.amazon.co.uk/Justice-Whats-Right-Thing-Do-ebook/d...
Often the envy seems to be about jobs where people have little idea of what is involved. For example in banking or being a CEO. I guess most people have a rough idea of the importance of a doctors skill, so they complain less. I also see few complaints about artists earning millions of dollars. How does Beyonce justify her income - maybe she should be replaced by some random street musician?
I think that puts claims on millions of dollars in perspective. Of course, given global inequality, most of us here probably have more than one full time servant-equivalent working for us.