Today I return to the subject of income inequality. For the overwhelming preponderance of Americans, income inequality is a consequence of the inequality of the wages and salaries attached to the jobs they perform. I shall talk today not about the causes of wage and salary inequality but about what justification, if any, can be given for that inequality. I am not concerned here only with the enormous disparity between the compensation of production or service workers and that of the CEOs of the companies for which they work but also with such disparities as the fact that a senior professor in a state university earns three times as much as the department secretary, a doctor in a hospital earns four times as much as a Registered Nurse and ten times as much as a hospital orderly, and so forth.
Two justifications traditionally are given for wage disparities. The Human Capital justification is that some require lengthy and expensive training, lasting in some cases for nine or ten years, and a higher salary is required to compensate workers for assuming the expense of that training and for foregoing wages during the training period. The second justification is that there are some jobs whose excellent performance is important to the productivity, and hence to the overall well-being, of the society, and higher salaries are needed to attract to those jobs young people who are especially talented or suited to them. Those familiar with Rawls’ work will recognize that his Difference Principle is a version of this justification.
Neither of these justifications holds water, in my judgment. The Human Capital justification first. It is of course true that almost every job requires some level of skill or prior preparation. In a modern capitalist economy, much of the cost of that preparation is socialized, borne by the state. That is the real purpose of public education, after all. In some capitalist countries even university education or advanced medical or technical training is similarly socialized, and there is really no reason why it should not be in this country. Currently, the median annual income for full-time workers in the United States is roughly $44,000. If a job requires a college degree [say elementary school teacher or big city police officer or Walmart store manager] then a young man or woman must forego $184,000 to acquire the degree [let us suppose, just to make this simple.] To make that back over a forty-five year work life [leaving aside inflation, amortization, etc etc etc] the job would have to pay $4000 more a year than a job not requiring a college degree, such as elementary school crossing guard or small town police officer or Walmart store greeter. I trust it is obvious that currently the actual wage differentials are vastly greater. Ah, you say, but what about the cost of the schooling, the crushing student loan debt? Average student loan debt in 2018 was a bit more than $33,000. I leave it to you to figure out that these data do not serve to justify the enormous wage disparities that characterize modern American life.
The Human Capital justification for the steepness of the wage and salary pyramid is nonsense.
Which brings us to the claim that large disparities in wages and salaries are needed to draw the ablest and best suited young people into the jobs requiring the scarcest and most demanding skills. This justification for wage disparities is so deeply rooted in the way we think about modern society that for the most part it never occurs to anyone actually to defend it. You don’t get more thoughtful or sophisticated than John Rawls, and yet he rests his entire theory on the claim without ever thinking to offer an argument for it.
In order to focus our attention and make the argument concrete, let me take as an example the Columbia University Sociology Department in which I shall again be teaching this fall. There are upwards of forty members of the department, including many distinguished scholars, and a support staff of four. Since Columbia, unlike UMass, is a private university, it is of course impossible to find out easily how much each of these folks makes [whereas at UMass this is public knowledge], but I think we can assume that there is a considerable pay gap between the senior professors and the departmental secretaries – maybe three hundred percent or more. How can this be explained and justified?
The standard answer is that it takes both long preparation and really rare talent to be a Columbia Sociology Professor, and the big bucks are needed to get the right people into those jobs. I freely grant that being a Columbia Sociology Professor requires long preparation and really rare talent. But do you need to pay big salaries to get the best people into those jobs. [Alert: I am going to ignore the effect of competition among universities in all of this. I trust it is obvious that that consideration can be bracketed for the purposes of this analysis. If it isn’t obvious, sit and think about it for a bit before you rush to comment.]
Well, think about it. Setting to one side the cost of job preparation and the foregone income [see above], suppose we ask Shamus Kahn [currently Department Chair] whether he would prefer to remain as a Professor of Sociology or take over the job of Winston Gordon III [one of the support staff.] Leave aside being Department Chair, which Shamus, like any sensible academic, could do without [or so he told me.] As a Professor, he would be expected to be on campus 32 weeks out of the year, two or three days a week. He would be in class 4 or 5 hours a week, would hold office hours 2 hours a week, would prepare lectures, and [ugh] would grade papers once or twice a semester. He would also be encouraged [but not required] to do any independent research he wished and every so often to publish the results. Contrariwise, as a departmental staff member, he would be expected to be on campus 48 weeks a year, five days a week, seven hours a day. He would answer the phone, file papers, respond to student inquiries, assist professors with secretarial tasks, run errands, and perhaps manage the finances of the department.
In order to explain why it is necessary to pay Shamus three or four time as much as Winston, we must assume that if Shamus were to be offered the same salary as Winston, he would respond, “If it is all the same, I would just as soon do Winston’s job.” Since the excellence of the Columbia University enterprise really requires that Shamus agree to be a Professor, we may suppose that a negotiation would ensue, with Shamus offered more and more money until finally, he replies, “Weeell, all right, but only if every seventh year you give me six months off from the grind; call it a sabbatical.”
Seriously? You can do the same thought experiment for a corporate manager and the man who cleans the toilets in the home office. To get the right people into the right jobs, you need to test them and sort them and sift them. But do you also have to pay the suits so much more than the shirts?