Hacker News Reader

Comment by lotsofpulp | Hacker News Reader

Not really. It is simply a consequence of a market lacking price transparency.

We have the internet. We have laws protecting employees discussing their pay. There is nothing in capitalism stopping anyone from disclosing their pay and creating a transparent market.

And it is happening, albeit slowly (see levels.fyi and glassdoor). CO’s transparency laws also help, and anything to help transparency will assist. The main resistance I sense is actually from people themselves, for various social and emotional reasons.

View on HN

Well, if you are on the higher end, you probably don't want to share with those on the lower end, simply because 1 of 3 things will happen.

1. They ask for a raise and don’t get it. You lose a team member when they leave.

2. You can’t get a raise because your boss is forced to give your colleague a raise and doesn’t want to have to hand out raises.

3. Your colleague stews and resents you. People say it won’t happen, but I have heard a ton of complaining about how X earns so much and they don’t deserve it from co-workers.

Yes, everyone likes to think they are top 10% (or even above average).

That is what I meant by my last sentence.

I have witnessed number 3 in action. My first programming job introduced pay bands a few years in (it was a young company that grew from small to a few hundred at that point) and word got around about the people who were already earning above the band for their level.

The mood around those who were already above their band went from "yeah they're okay devs" to "wtf, those guys aren't nearly good enough" pretty quickly.

I'm just happy to be one of those that got a good raise to meet the bottom of my payband and not the other way around.

> 1. They ask for a raise and don’t get it. You lose a team member when they leave.

Yes and that should be a lesson to pay the whole team more.

> 2. You can’t get a raise because your boss is forced to give your colleague a raise and doesn’t want to have to hand out raises.

Your colleague wasn't paid well, asked to get paid better, and got it.

Now you're said because you can't continue to get paid more relative to your colleague? Lose your greed and grow some empathy in its place.

> 3. Your colleague stews and resents you. People say it won’t happen, but I have heard a ton of complaining about how X earns so much and they don’t deserve it from co-workers.

Then work with them to explain how and why you deserve more than your colleagues. Otherwise, they might be right about you not deserving it. You getting what you don't deserve means, by your own logic, that they're not getting what they do deserve.

> Otherwise, they might be right about you not deserving it.

#3 results from a fundamental confusion people have that pay is based on people "deserving" something. Like it's an expression of virtue or your worth as a person or a reward for doing something good.

It's not. You're paid based on supply and demand and your negotiating skills, nothing more. It's not a golden star from your teacher that you're a nice boy. It's whatever you were able to convince the company the monetary value of your contribution is worth. That's all. Get over whether someone deserves this or that. I'll solve this once and for all: nobody deserves anything. You're responsible for figuring out how to provide value and capture it.

I do believe in getting paid what's deserved and what's deserved changes as the market changes.

What's unfortunate is that people aren't willing to see the change go downward ever and then also argue that others can't go upward because... well then you yourself "can't" go upward.

What's deserved is for people to be compensated fairly. If the company is compensating someone unfairly and can't compensate someone fairly because of then, then that is a definite and clear problem.

Whatever your definition of fair is, whether that's "deserving" or "market forces", it's still the same argument.

> I do believe in getting paid what's deserved and what's deserved changes as the market changes.

Well there's 2 major theories of thought about that.

One is that the holders of the capital decide how much to pay, and they make the bulk of the market. You get paid what you negotiate.

The other is that the worker will never be paid what they are worth. In other words, their surplus value is equal to the new value created by workers in excess of their own labor-cost, which is appropriated by the capitalist as profit when products are sold.

And in this country, we're seeing the beginning of the second with Antiwork and the Great Resignation. Many of us Zennials are really tired.

"fair" and "deserving" have the same problems. It's just adding unnecessary moral dimensions. What's fair is whatever both parties mutually agreed to. If you agreed to be paid $X and employer pays you $X, then that's fair. Whether they might have possibly agreed to pay you $X + %10 or $X + 20% or whatever is irrelevant. What they're paying other people is also irrelevant. You saw the number, you said "ok" and that's that.

If you were theoretically willing to pay $5 for a gallon of milk and you walked into a store and they were selling it for $2, I'm sure you wouldn't insist they take the extra money. It's the store's job to figure out how much to charge for milk. It's your job to figure out how much you're willing to charge for your labor.

"What's fair is whatever both parties mutually agreed to"

You could argue there's an important caveat of symmetric information around this interaction if you want to talk about fairness. Asymmetric information is frequently considered an unfair advantage (see insider trading) but is also recognized as the source of much profit (see auction winner's fallacy), but you have to at least recognize that employers by and large have a huge information advantage in the labor market currently.

There's also asymmetric information with the milk. I don't know what it cost for the producers, or how much the store paid wholesale. Maybe it's only $0.05 a gallon on their end. Who knows? The only thing that matters is if the retail price is something I can afford and am willing to pay.

It's true that employers are privy to a lot more salary information than employees. I know I said what other people are paid is irrelevant, which I think it is in terms of fairness, but you should be (and, legally at least, in the US, are) free to take that information into account when deciding what you'll accept. It's still up to you to make that decision and hold employers to it. They aren't going to offer up higher salaries out of the kindness of their heart or some sentimentality about fairness.

> The only thing that matters is if the retail price is something I can afford and am willing to pay.

Unfortunately that's not quite true. Milk (and other foodstuffs) are a requirement to live. People are "willing" to pay more for that because they don't really have many other options. So it's ripe for abuse.

> You're paid based on supply and demand and your negotiating skills

Your ability to negotiate your own salary is pretty orthogonal to your ability to do most jobs. Some jobs definitely require the ability to negotiate in the form of compromise, but rarer are the positions where the brinksman-style of salary negotiation (where you credibly would scuttle the entire deal) would be useful. It should be pretty easy to figure out within a year how a new hire compares to the existing employees and were they _should_ be on the salary totem and set them on the proper trajectory from there.

There would certainly be other knock-on effects from true salary transparency, but bias towards salary negotiating skill is much closer to bias towards people-who-look-like-me than it is to bias towards people-who-generate-value-for-the-business.

You make it sound like your salary is just meaningless points, but of course the reason coworkers might resent a seemingly overpaid person is that they’re actually very meaningful points that are fungible across everyone’s salaries. And it’s totally compatible with what you’re saying if it turns out that salary transparency itself affects the supposed “negotiating skills” of the highest earners.

> Not really. It is simply a consequence of a market lacking price transparency.

With close to perfect information, there is little room to profit, which would put a spoke in the wheel of capitalism.

I do not think so. See retail and insurance businesses, with their consistent 2% to 6% profit margins.

Bigger potential profits merit bigger risk taking. But not all investments have the same risk profile and time horizons.

Insurance is so far from perfect information though. Maybe perfect information in for an average year is possible, but it is the black swan years that knock you out.

Even then, there is no perfect information on clients.

It's not a matter of thinking so or otherwise. It's a mathematical question of what value each worker added to the product. Other expenses aside, profit is the difference between the value they added and the wage they were paid. You don't get profit without underpaying relative to the value provided by a worker.

That’s simply not true.

If I create value by hitting in a nail with your hammer I deserve compensation for my labor, but certainly you deserve compensation for the part your hammer played as well.

Wages are simply returns to labor, profits are returns to capital.

The hammer is an expense, as I mentioned. The hammer doesn't deserve interest payments for existing IMO.

It’s not an expense, it’s capital. The nail is expense.

Your assumption is that each worker is solely additive or multiplicative to the process, and thus the marginal worker's input is uncorrelated to the team and the environment. Certain teams can be exponentially performant while mostly full of mediocre individuals, and certain processes can stunt the fruit of the vine.

Rather, what you're calling for is average value produced, which is substantially different. I'm not sure I accept the assertion that they are close.

I'm not talking about individuals. In aggregate, you don't profit unless you pay your workforce less than the value they produce. It's not complicated.

Value is an ill defined word to use in economics. I rarely, if ever, have seen a good reason to use it.

Obviously, employers are not going to operate a business at zero profit margin, so I am not sure what the significance of pointing out that employees do not get paid the sum total of their economic contribution to a business’s profits (which I imagine is rarely ever calculable).

The whole point of having buyers and sellers engage in numerous, transparent transactions is to figure out what portion of the business’s operations should be allocated to the purchasing of labor, since there is no objective way to measure it and have a definitive answer. It is always moving, and needs to be continuously updated. The same reason employees always need to be shopping around and seeing who will offer them the appropriate price for their labor.

The macroeconomics are built from microeconomic foundations.

What spoke in the wheel? In hypothetical perfect competition there is zero long run economic profit. The whole point of profit motive is that the opportunity for economic profit means there are resources being allocated inefficiently.

> There is nothing in capitalism stopping anyone from disclosing their pay and creating a transparent market.

Is that actually true? Is it possible to verifiably disclose one’s pay? Are you supposed to sign an affidavit or something?

Yes? Using records such as paystubs, W-2, or 1099.

Obviously, they can be falsified, but I presume we are not talking about that. There is also the Norway method of having the government provide it.

If the idea is for the entire labor market to change significantly due to everyone voluntarily sharing their salary, then we ought to be talking about a mechanism of ensuring honesty, just like an auction (generally) wants to design their auction in such a way that people are honest about their willingness to pay.

Ideally, but you do not need the entire labor market to participate to do it. I am guessing even shining a light on a small, representative set of real time data will be enough to get things moving.

Reply on news.ycombinator.com