If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people?
I'm not necessarily saying they aren't, just that such an argument should be made explicitly.
A low-income earner is more likely put any extra money they acquire towards the local economy rather than, for example, lodging it in the Cayman Islands for storage. This is good for keeping the local economy healthy, from which may come the next person to create a technological breakthrough.
We generally want the median person to have money to spend with our businesses rather than slowly edging towards living in a slum.
Because it isn’t. We have other indicators for that and GDP growth is one of them. Median wages are affected by so many factors that they invalidate such conclusions. Also, wages aren’t the only money available for spending, there‘s capital income too.
Anyone who has ever had a body is probably familiar with the concept of the whole seeming OK, while there's something unhealthy happening in the small. I'm not rejecting other metrics, but I don't think this is irrelevant to the economy at large.
The comment you're replying to pointed out that the absence of a wage or presence of a low wage probably does not correlate with an equivalent amount of passive income for the vast majority.
You reject this and call it "vague speculation", for which I assume that the alternative theory is that there's a substantial majority of passive income earners at the bottom of society. It's an interesting theory.
It's possible. More economically savvy people = more early retirees. Higher rents could also be a factor (some people might be able to sustain their families with previously worthless property and low wages). Let's not call these people "bottom of society" though. I know a few with 0 wages and 7 figure capital incomes.
Sure you can point to any individual employee and declare "you didn't invent or buy that computer that makes you work more efficiently, so why should you get more money?", but the CEO or shareholders didn't invent the computer either, and buying a PC is a fairly small expense, so why should they be the ones to benefit from the increased productivity?
Because they hold power and the regular employee doesn't. I think that's the only real explanation for this discrepancy: CEOs and shareholders have power, while the regular employee doesn't, and that power imbalance means more money goes to the CEO and shareholders.
It's less about that as it is about your three remaining employees being rewarded handsomely for the highly productive work they do on their computers, but the seven who you let go and who now work at Walmart are no longer paid wages that are coupled to that increased productivity.
A couple of years I came across a claim that compared to 50 years ago, the ratio between a CEO's salary than that of a regular employee of the same company, has shot up by one or two orders of magnitude. CEOs make way more than they used to, regular employees don't.
Productivity -> more goods/services -> richer society, wages be damned.
Because the company owns the computer, and the work done by it. The employee is paid to do that work, and the CEO is paid to do their work. The company (and the market) decides what they are willing to pay the CEO, the worker, and the share holders, and each of those parties agrees to it. These are not slaves, none of these people are forced into these agreements against their will.
> Because they hold power and the regular employee doesn't. I think that's the only real explanation for this discrepancy: CEOs and shareholders have power, while the regular employee doesn't, and that power imbalance means more money goes to the CEO and shareholders.
Or because they are worth less in the market than the CEO is. What those parties have is "leverage" and "marketability" and "ownership", not some evil "power" construct. Ownership is available to general employees in a co-op, and people are free to join them, or start their own companies. If they choose not to, that's their choice.
If that's not enough to tell you something wrong, then consider that even failing CEOs, CEOs of companies going bankrupt or in other kinds of trouble, still get multi-million dollar bonuses.
It really is power. You can call that power "leverage" or "ownership", but it's still power that regular workers don't have.
E.g Uber's executives are very well compensated, and are nothing but middle-men. Middle-men that are easily replaced, as demonstrated by the Uber clones in cities that banned Uber.
- the rule of law and a court system that allow VC's and others to sign billion dollar contracts with only minor fears of being cheated
- a large supply of underemployed people rich enough to own a car, but desperate enough to cash in the depreciation by driving for Uber
- a massive public road system
- a market
- and much more.
For all of this, they pay very close to nothing as their income is mostly capital gains.
Uber is a growth company, so we can expect that corporate tax has little effect on them, for the simple reason that they're not making much money (by design). Still, their capitalization has some notion of corporate tax baked into it, because if they become a giant and start returning earnings to owners, then this will be impacted by corporate tax.
I don't like that we have this complicated system of double-taxing corporate earnings at lower rates, as opposed to taxing earnings as income for the owners of the company. I know that many companies find ways to skirt corporate tax... but not all, and not really the majority (but preferentially the huge companies). I also know that the combination of these two taxes may not total to what the individual owners would have otherwise paid if the earnings had been ordinary income. Still... it's not as simple as "capital gains".
So that's basically the case for progressive corporate tax. Everyone acknowledges that small/medium business pay the full tax rate, while large/huge corps always never anything close to it. With progressive taxation you can directly impact the latter and not the former.
Top managers wages are completely fictitious. Investors generally don't care though, since it is basically nothing compared to turnover as a whole.
I believe as an American I’m missing some important context to understand this comment.
The purchasers (taxpayers) are not willing to pay sufficient wages in order to incentivize [the right] people to pursue it as a career.
For those remaining 25 years, they will tend to prioritize money in their pockets over a teacher's salary; a situation that does not align with the betterment of our society at large.
The million dollar teachers will do things like actively manage the student's home life or business trajectory, give them personalized curricula, connect them with opportunities to gain hands-on experience, etc.
Not saying you're wrong re: the incentives or anything, but a lot of people don't even know this segment of the market exists.
You have named the very reason the teachers are angrily protesting any and all attempts at evaluation of teachers' productivity. Or introduction of private (i.e., market-based) schools competing with the state run ones.
With most salaried, white collar jobs your payscale is almost completely decoupled from your productivity. You are paid based on the market value of your skills and experience. You're essentially a commodity.
We see this in the software industry all the time: There's little salary difference between a "good" and "mediocre" programmer. The so-called "10x" engineer, myth or not, is likely to make just 10% more than their peers, if even that, not 1000% more.
In the meantime, of course, it's as you say - and in fact they may be paid less, because they're spending their energy on engineering instead of political maneouvering.
I don’t think that’s true. There are plenty of people who do great work but aren’t good at necessary self promotion. Or they just want to stay where they are. So they are very productive but are paid pretty much like everybody else.
An essential condition for things to be commodities is that they're fungible. If we accept that your "good" and "mediocre" programmers are commodities, there's no basis to call them "good" and "mediocre" because they're fungible to their employer. And if there's a basis to do that, how are they fungible ?
Being fungible doesn't imply that there is no quality difference between goods. It just means the quality difference is irrelevant to the purchaser. Stationeries are viewed as commodities by most businesses but I can still distinguish a good pen from a bad one.
That doesn't seem right. An entry level programmer will make around $100k. There are definitely engineers out there that are paid more than a million a year
Not in the US, but I'm sure this is quite common and compensation anywhere near reflecting the performance is a rare exception.
I'm not saying the system is perfect at identifying who's the 10x engineer and who's the bum. But once identified there is definitely a gap in pay roughly equivalent to the difference in production.
The compensation scheme at companies that employ them.
>What generates that gap in pay?
All companies are different but it's typical a difference in grade or rank.
There is literally zero chance a high performer would get even 3x salary compared to their peers. Those pay ranks simply do not exist.
And what the toolmaker "deserves" is decided in negotiations between the toolmaker and the people who pay for the tools. It seems they've decided that these tools are worth quite a lot.
So if you're a farmer, and you're given a new kind of tractor that doubles the yield of your fields, you'd be totally fine if your landlord just took the extra crop for himself, leaving you with exactly the same amount as you would have had without the new machine?
What is the reason for keeping wage tied to time rather than productivity or work, other than a quest for ever increasing profits? And if the wage can't be increased why not decrease the time? This way the worker gets a reduction in time for the same wage and the employer still gets a hefty productivity increase over a few decades ago for the same wage.
I see some countries have actually kept wage and productivity tied to each other and it doesn't look like it was detrimental to the economy.
I'd appreciate dissenting opinions in a more productive format like counterarguments rather than a wave of downvotes.
If the issue was, as you are implying, one of distribution, we should be seeing income inequality growing while the wage share of the national income stagnates.
That's not at all what is happening. The wage share has been steadily declining since the 80s. The truth is that shareholders not workers got the lion share of the productivity increase.
Other people? The rich? Or even machines? There are several questions raised here.
Even if we go with the presumption that the rich are simply more productive/useful and "deserve their income", that still doesn't answer the question of why inequality is increasing.
Did the rich simply start to get significantly better than the rest around 1980? Instant evolution? Or perhap the economy is becoming "winner take all". The more you control the more you CAN control. For example, the big tech co's have huge patent portfolios in which to sue any upstarts from entering their turf. Their big competitors have their own giant portfolios to defend against each other's patent claims via counter-suits. Thus, smallbies are essentially locked out, forced into niches.
Even if we assume they deserve their big incomes, it could still pose a risk to democracy as the rich buy influence. The Supreme Court more or less has concluded money is free speech, meaning the rich (and corporations) can speak louder than the rest. Their point of view gets splattered everywhere and counter arguments from regular folks get drowned out. And there is campaign donations, which is legalized bribery, which the Court also upheld. The rich can use their influence to get even more politicians and judges in play which favor the rich, creating a runaway train of influence. "Slippery Slope" is often considered a debate fallacy, but we are sliding into inequality in practice. Sliding does sometimes actually happen. Unions are being gradually stripped of power by politicians and the courts, for example.
Therefore, even if one accepts that the rich deserve most their money, their spending power may have the practical side-effect of undermining democracy and equal representation.
And, how many mansions, Maseratis and swimming pools does one "need" to be sufficiently rewarded? 7?, 20?, 82? I thought it really telling that John McCain lost track of how many mansions he owned.
If we assume it's machines that have generated the increased total wealth, then obviously machines don't want nor need money (although I'm working on a Greed-A-Tron). So who gets it? The owners of the machines typically do, but are we just rewarding them for simply owning more machines than you and I? Owner take all?
The argument is not quite "winner take all" but as the article said "winner take most". We have increasingly become a knowledge economy. Technology has created a multiplier effect, where the productivity of the top decile or so of performers is magnified significantly by software and other things, making them have even more of an edge over the bottom 90%.
It's a competition between the capital/investment cycle of the economy and the labour/consumption cycle. In this case it boils down to leverage in employment negotiations. Those 10% crackerjack hyperworkers you're theorizing exist would be even BETTER off if they were recouping a larger amount of the margin they were producing.
You can make developer bucks working as a blue collar worker on an oil rig, or as a normal dude on a fishing rig. These people aren't making cash because they're 'knowledge workers'. They're just supplying labour to a field with solid demand.
Are you saying the CEOs are solely responsible for this productivity gain?
Maybe you should look harder.
I saw this as an argument against profit. If you changed 'the median worker' to 'the capitalist', it might show up in 'The Communist Manifesto'.
I usually turn this question around: as a programmer, I'm responsible for a greater share of productivity than some people in different functions who are paid less. However, I do not work harder, do not sacrifice more, do not hate my job more - more likely the opposite, even. Why am I entitled to a larger share of profits than other people?
(I understand that the system generally "works better" this way. However, since we're talking about being entitled to something, I wonder if there's a moral argument that can be made.)
Basically, your compensation is based on the face-value of the results of your work, as well as the difficulty necessary in order to be capable of doing such work. So for other positions that require more work-per-hour, they get less usually because a greater population is capable of that same work. (and so, someone somewhere can be found to do it cheaper)
I think that seems to be missed a lot in discussions of this nature, the value of training and the scale of populations with given skills and how more training generally means less people and therefore less who are desperate and will take a lower than standard wage. (while with unskilled positions, it's automatically a race to the minimum)
I don't have an objectively provable rule, but I do have one that makes a pretty good starting point: if you create something valuable, you should be able to capture most (or even all) of that value.
of course, no one just creates things from scratch. they use tools designed by other people, they use resources extracted from the earth, their productivity might be multiplied if directed by a good team leader, etc. if you take the final product and subtract all the tools, resources, and infrastructure used, you have your personal contribution. I think we should strive for a system where the worker keeps as much of their contribution as possible. some people's contribution will be much larger than others', depending on their skills and the type of work they do, but I don't think this is inherently unfair if you have first accounted for all the external things they have benefited from.
A guy that digs gold out of the ground is going be able to sell that gold at a higher price than a guy digging worms; while working at exactly the same “hardness.” There are those that would suggest that both should be paid the same, which is ridiculous as that suggests a pound of worms is as valuable as a pound of gold.
You aren't entitled to profits at all. Profits come after cost. You're cost. You cost more because the demand for your labor versus the supply of your labor raises the price of your labor.
Don't assume this will go on forever, the next bust may well wipe out the huge wage advantage of today's tech workers.
2) The fact that you are paid more ensures that society's demand of your kind of labor is met, resulting in a more efficient allocation of resources. If everyone instead was paid the same, there would be less incentive to get better training or to perform undesirable work, resulting in less efficient allocation of resources.
It is moral to allocate resources more efficiently, as it increases well-being and reduces waste.
> If it were, that would mean being opposed to e.g. being taxed to take care of the disabled.
Not at all. A society which allocates resources more efficiently has more resources available to deal with such problems. It is also in the self-interest of every individual to be taken care of, should they become disabled.
The (im)morality of using taxation to this end (as opposed to voluntary charity and private insurance) is a separate debate altogether.
> I'm wondering whether there's a way to reconcile those two in the same moral framework.
They're already reconciled.
If the median worker isn't responsible for the increased productivity, it follows trivially that you can do something to increase the median worker's productivity, earning higher profits, until all firms in your sector do it and you all end up having to compete for the increasingly productive workers by raising wages.
https://www.epi.org/publication/understanding-the-historic-d...
The most likely inference, a priori, for where this process has broken down is: employers aren't having to compete for workers very hard any more, so competition doesn't push labor prices up.
The work of other people? Is productivity increments the result of some people working harder instead of and increment in technology and knowledge?