Executive pay is supply and demand. The mayor is being paid $450k because a person with the necessary skills was willing to take that salary (after fighting off opponents) to become mayor. Mayor comes with prestige, so more people want to be mayor, and $450k is not a terrible incentive to go after. If the government paid $80k a year, no one would become mayor. If they paid $1m a year, too many qualified people might be interested, or – the right people might become interested.
Imagine you’re a CEO who successfully ran and sold a business for $250m. You now have at least $25m. Why would you ever want to work an intense job again? Being CEO is exhausting.
Executives are paid a lot of money because they’ve already made a lot of money: if you want to incentivize them there has to actually be something at stake.
That said, these decisions are usually made by a board, which is small and has limited knowledge.
There is plenty of room for them to miscalibrate, too, but paying too much for an executive is bad business. Paying too little is, too.
The board is usually made up of other executives or former executives. This group sets each others salaries unlike all other professional categories.
Now, here in the UK, the remuneration of University heads (Principal, Master, Dean, or whatever title) are having their pay determined by the going rate for CEOs. These are people who do the job for a couple of days a week; they aren't exactly struggling to get on top of the workload. Same for the bosses of the jungle of pseudo-companies that make up the modern NHS; they're all basically employed by the taxpayer. They've employed so many managers that their organizations are hopelessly top-heavy, and yet they need huge remuneration.
Can they not delegate? I thought the ability to delegate was an essential skill for any manager.
I do understand how it came to all of this and how the situation is justified but just posed that if we turned our back to completely free markets and imagined a structure based on "fairness" then things should probably be different.
Furthermore I disagree with the argument that nobody would want to work an intense job while being "underpaid". Plenty of labor is really intense and pays minimum wage or barely over.
I don’t think I’ve seen a good coherent theory for this specifically
I very much doubt this. New Hampshire legislators get $100/year, since 1889. Still plenty interested in the job.
It’s an interesting filter to pay nothing, for sure! At that point, it is filtering for people who can afford their own lifestyles without a job