They aren't completely determined by this. An extremely small percentage of people could play minor league baseball or the XFL. Yet they still aren't paid much compared to their highest level counterparts.
No I didn't. The minor leagues are a decisive counterexample. Only a very small percentage of the population can play as well as a minor league baseball player. Therefore, they should get a wage that is proportionate to that. In fact, the best minor leaguers should have borderline MLB salaries.
It's how much value you create AND how many people can do it, not just the latter. Surviving alone in the woods for a decade would be a rare skill indeed, but you won't get paid much for it because it doesn't provide much value to others.
You're wrong on many counts with the minor league example by the way. It's an extremely rare skill that 99.9% of people couldn't ever hope to do no matter their training. These people are on the doorstep of the majors and the tens or hundreds of millions of dollars that the best MLB players can get. It's much more difficult than say being a doctor, which millions of people do every day worldwide and many millions more could with practice/education. Doctors just provide a lot more value than minor league baseball players (if you like baseball you probably only watch the majors, which scales infinitely with TV), even though the skill is more common.
From a purely market-based POV, don't you think some of those "virtuous" workers could be considered underpaid because their labor leads to positive externalities? IE teachers, whose labor (in theory) contributes to a better-educated labor force? Or social workers whose efforts to connect drug addicts with treatment and housing make our cities safer and cleaner?
Assuming those positive externalities are true for sake of argument, you would be unpaid by the free riders not by your employer. Your employer is paying you for the value you produce for him. The free riders are paying you nothing for what you produce for them.
That's fine, the point is that these workers simply should be paid more to rectify the positive externalities, not that they should necessarily be paid more by the entity who employs them.
Generally, if someone is providing value to the public beyond what the market price would indicate, the remedy is a public subsidy. That way the freeriders will compensate that person through their taxes. For example, if a social worker connects a dozen homeless people in a particular neighborhood with housing and drug treatment, it becomes easier for store owners in that neighborhood to do business. It is therefore fair for the store owners to be taxed to better compensate the social worker even if the market does not price the social worker's skills very highly.
That's completely setting aside the value a social worker provides to people who are simply unable to pay them anything. I think the fair way to compensate that value deserves an entirely separate discussion.
This was a bit more savage than the typical post, heh.
Another wrinkle to #6 is that even if employees had a crystal ball that could tell them how much value they are contributing, they don't actually understand how much they're being paid! Ask someone who makes $50k/year how much they think it costs their employer to employ them. In my experience people will say $50k. You don't have to talk to many small business owners before you realize that employing that $50k/year employee is significantly more expensive when healthcare, 401k, workers' comp, etc are involved. Public school teachers are a particular example that tends to base their judgement on wages instead of total compensation. The dollar value of pension funds, tenure, and months of the year off are often ignored when comparing teacher wages to something like "the average wage of a master's degree holder".
"A fair price is one that splits the surplus equally. That is, if the buyer's valuation is B, and the seller's valuation (or 'cost') is S, then the fair price is (B + S)/2."
To be clear, I don't myself believe in 'fair prices', but I do think this is one of the more plausible candidates.
The problem is that the marginal surplus is approximately zero. The employer hires up till the point at which he is about indifferent to hiring the last employee.
I don’t see the problem. If B = S (zero surplus from a trade), then the rule above requires a price p = (B + B)/2 = B = S. Why is that an unfair price?
Oh yeah, that's fine, that's not unfair. But then you wind up endorsing the market price in most circumstances, which I thought the "fair price" people were trying to avoid.
A Marxist would object to saying that the rich are paid more than their labor is worth, if they do no labor. And indeed, it is possible for rich persons to just put all their wealth that they wish to preserve and invest into hedge funds, and collect the dividends. In this case, they get paid for making a decision or judgement. What they get paid depends on how well they predicted the performance of the hedge fund. While I do not object to that, it doesn’t seem to fit the frame discussed in the post.
Maybe it needs a different sort of defense, one that defends the idea that people can save and invest in the first place, as opposed to having the state or some workers’ collective invest savings at the level of the community. Should we have the right to postpone consumption and use the remainder to start or participate in some project? Or even if the Marxist denies that, is it plausible that a planning committee or workers' council will be able to improve upon the market's ability to experiment? The Marxist could argue that planners can experiment too, but historical experience so far indicates that they are fond of one-size-fits-all solutions that compel everyone to participate. Experimentation seems to contradict the reasoning behind centralizing things in the first place.
Yeah, whether or not investment activities count as "labor", we could just say that the investors are generally paid according to the value that their activities (whatever we call them) contribute to economic productivity.
Say there's an entrepreneur who wants to start a business. He needs capital to make it happen. An investor comes along an offers the capital in exchange for a share of the profits, if there are any. The investor did something useful; the business couldn't have gotten off the ground without him. He then gets a reward roughly proportioned to how useful his contribution was.
And the hedge fund is just a mechanism investors can use to accomplish that if they lack confidence in their skill at investing. This (we hope) concentrates the decision making in the hands of those with a good track record.
Wages / salary have nothing to do with how hard you work, they are determined by how many people could do the job.
95% of people could sweep the street
50% of people could deliver the mail
20% of people have professional qualifications
1% of people are doctors
0.000001% of people can win a PGA event, or sell out a stadium concert.
This is kinda how it works.
The main barrier to the higher paid jobs is that you have to invest a huge amount of your time in accumulating valuable skills.
It’s about 10,000 hours of extra study and training to become a professional. That’s 10,000 hours unpaid, doing difficult and thankless stuff.
Nobody does the 10,000 hours if there’s no reward for it. That’s why communism fails every time it’s tried.
They aren't completely determined by this. An extremely small percentage of people could play minor league baseball or the XFL. Yet they still aren't paid much compared to their highest level counterparts.
You’ve just made my point.
Fewer people can play at the highest level which is why those people are paid more. Fewer people can be league MVP which is why stars are paid more.
All that matters is how many people in the world can do a role. Is it 5 or is it 50 million?
No I didn't. The minor leagues are a decisive counterexample. Only a very small percentage of the population can play as well as a minor league baseball player. Therefore, they should get a wage that is proportionate to that. In fact, the best minor leaguers should have borderline MLB salaries.
Yet they are paid less than minimum wage earner every year. https://fanbuzz.com/mlb/minor-league-baseball-salary/ Unless you think more people can play minor league than be a minimum wage worker.
I would guess that for every minor baseball position there are 1,000’s of people willing and able to do it.
How many players are there? 200? How many people could do it? 10,000’s? They’re all easily replaceable.
It's how much value you create AND how many people can do it, not just the latter. Surviving alone in the woods for a decade would be a rare skill indeed, but you won't get paid much for it because it doesn't provide much value to others.
You're wrong on many counts with the minor league example by the way. It's an extremely rare skill that 99.9% of people couldn't ever hope to do no matter their training. These people are on the doorstep of the majors and the tens or hundreds of millions of dollars that the best MLB players can get. It's much more difficult than say being a doctor, which millions of people do every day worldwide and many millions more could with practice/education. Doctors just provide a lot more value than minor league baseball players (if you like baseball you probably only watch the majors, which scales infinitely with TV), even though the skill is more common.
OK, my rule applies to 99% of all taxpayers but breaks down when you consider some glorified circus performers.
From a purely market-based POV, don't you think some of those "virtuous" workers could be considered underpaid because their labor leads to positive externalities? IE teachers, whose labor (in theory) contributes to a better-educated labor force? Or social workers whose efforts to connect drug addicts with treatment and housing make our cities safer and cleaner?
Assuming those positive externalities are true for sake of argument, you would be unpaid by the free riders not by your employer. Your employer is paying you for the value you produce for him. The free riders are paying you nothing for what you produce for them.
That's fine, the point is that these workers simply should be paid more to rectify the positive externalities, not that they should necessarily be paid more by the entity who employs them.
Generally, if someone is providing value to the public beyond what the market price would indicate, the remedy is a public subsidy. That way the freeriders will compensate that person through their taxes. For example, if a social worker connects a dozen homeless people in a particular neighborhood with housing and drug treatment, it becomes easier for store owners in that neighborhood to do business. It is therefore fair for the store owners to be taxed to better compensate the social worker even if the market does not price the social worker's skills very highly.
That's completely setting aside the value a social worker provides to people who are simply unable to pay them anything. I think the fair way to compensate that value deserves an entirely separate discussion.
This was a bit more savage than the typical post, heh.
Another wrinkle to #6 is that even if employees had a crystal ball that could tell them how much value they are contributing, they don't actually understand how much they're being paid! Ask someone who makes $50k/year how much they think it costs their employer to employ them. In my experience people will say $50k. You don't have to talk to many small business owners before you realize that employing that $50k/year employee is significantly more expensive when healthcare, 401k, workers' comp, etc are involved. Public school teachers are a particular example that tends to base their judgement on wages instead of total compensation. The dollar value of pension funds, tenure, and months of the year off are often ignored when comparing teacher wages to something like "the average wage of a master's degree holder".
What about
"A fair price is one that splits the surplus equally. That is, if the buyer's valuation is B, and the seller's valuation (or 'cost') is S, then the fair price is (B + S)/2."
To be clear, I don't myself believe in 'fair prices', but I do think this is one of the more plausible candidates.
The problem is that the marginal surplus is approximately zero. The employer hires up till the point at which he is about indifferent to hiring the last employee.
I don’t see the problem. If B = S (zero surplus from a trade), then the rule above requires a price p = (B + B)/2 = B = S. Why is that an unfair price?
Oh yeah, that's fine, that's not unfair. But then you wind up endorsing the market price in most circumstances, which I thought the "fair price" people were trying to avoid.
A Marxist would object to saying that the rich are paid more than their labor is worth, if they do no labor. And indeed, it is possible for rich persons to just put all their wealth that they wish to preserve and invest into hedge funds, and collect the dividends. In this case, they get paid for making a decision or judgement. What they get paid depends on how well they predicted the performance of the hedge fund. While I do not object to that, it doesn’t seem to fit the frame discussed in the post.
Maybe it needs a different sort of defense, one that defends the idea that people can save and invest in the first place, as opposed to having the state or some workers’ collective invest savings at the level of the community. Should we have the right to postpone consumption and use the remainder to start or participate in some project? Or even if the Marxist denies that, is it plausible that a planning committee or workers' council will be able to improve upon the market's ability to experiment? The Marxist could argue that planners can experiment too, but historical experience so far indicates that they are fond of one-size-fits-all solutions that compel everyone to participate. Experimentation seems to contradict the reasoning behind centralizing things in the first place.
Yeah, whether or not investment activities count as "labor", we could just say that the investors are generally paid according to the value that their activities (whatever we call them) contribute to economic productivity.
Say there's an entrepreneur who wants to start a business. He needs capital to make it happen. An investor comes along an offers the capital in exchange for a share of the profits, if there are any. The investor did something useful; the business couldn't have gotten off the ground without him. He then gets a reward roughly proportioned to how useful his contribution was.
And the hedge fund is just a mechanism investors can use to accomplish that if they lack confidence in their skill at investing. This (we hope) concentrates the decision making in the hands of those with a good track record.