Coming Soon:

The following books by Robert Paul Wolff are available on Amazon.com as e-books: KANT'S THEORY OF MENTAL ACTIVITY, THE AUTONOMY OF REASON, UNDERSTANDING MARX, UNDERSTANDING RAWLS, THE POVERTY OF LIBERALISM, A LIFE IN THE ACADEMY, MONEYBAGS MUST BE SO LUCKY, AN INTRODUCTION TO THE USE OF FORMAL METHODS IN POLITICAL PHILOSOPHY.
Now Available: Volumes I, II, III, and IV of the Collected Published and Unpublished Papers.

NOW AVAILABLE ON YOUTUBE: LECTURES ON KANT'S CRITIQUE OF PURE REASON. To view the lectures, go to YouTube and search for "Robert Paul Wolff Kant." There they will be.

NOW AVAILABLE ON YOUTUBE: LECTURES ON THE THOUGHT OF KARL MARX. To view the lectures, go to YouTube and search for Robert Paul Wolff Marx."





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Thursday, July 4, 2019

MORE ON INEQUALITY


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?

23 comments:

Dean said...

Do you mean $176,000 rather than $184,000, i.e., 4 years of college @$44,000 foregone annual income?

Another aspect of the Human Capital justification troubles me. I assume many of its proponents are comfortable believing, in a circular fashion, that people are paid what they're worth, i.e., what the market will bear. Nothing is forcing the CEO to be a CEO, the janitor to be a janitor, nor either of them to leave their posts to go school. Thus, were the janitor to quit his (or her) job to get an MBA for which he will pay a tidy sum in tuition and professional fees, as well as forego his janitor's income, he will end up having paid for exactly what he sought, namely, an advanced professional degree. The cost of the education is exactly what it's worth. Hence, no premium should be "required to compensate workers for assuming the expense of that training and for foregoing wages during the training period." The market, in its marvelous perfection, exactly compensates the expense of the education with its result, a credential.

Nonsense, I know.

ZeroAltitude said...

Good morning, professor! I am intrigued by your argument against the position that the wage differential is caused by the need to attract talent. However, in my current view, your argument is too brief to be convincing, similar to the absence or brevity of arguments for the view. I will try to add to the growing pile of arguments here by offering some of my experiences in the corporate world trying to hire software engineers. I myself began as an academic, getting my PhD in philosophy, moved to software engineering and am now a manager of software engineers. My view is that your argument successfully captures a phenomenon that is completely predictable in an impure capitalism: local wage divergence from supply and demand. However, globally, or in a completely pure and unregulated capitalism, there would be a strong tendency against such divergences. If this is true, then I think your argument from a solitary example of a wage disparity not explained by a need to attract talent is unsuccessful.

First, what do I mean by "impure capitalism”? I mean simply to point to an economic system that is not regulated only by supply and demand considerations. Take for example the case of the professor and the department admin. Academia is famously not a pure capitalist system. Professorial standing and salary considerations stem from a system of tenure that makes the market not entirely free from regulation beyond that of supply and demand. People often point to other ways in which the economic system prevalent in the United States is not a pure capitalism, including regulation of financial markets and instruments and so on. I apologize in advance for the naivety of this definition — I am nowhere near the economist that you are, and so I hope that I am not so ridiculous as to harm my own argument in some fundamental way.

Now I turn to my own thoughts on “local” versus “global” wage setting by capitalist forces. In broad strokes, what seems natural to me to assume is that in impure capitalist systems, there will remain local wage inequalities that really are as you say not explainable by supply and demand. However, this isn’t true because in general that explanation is bad, but simply because we’re humans, things change quickly, rules and regulations sometimes have unexpected consequences, and there are fads that explain wild wage divergence that pops up from time to time that has nothing to do with the failure of the general explanation of supply and demand as the dominant force in wage setting.

(continued, sorry, limited my comment to 4096 characters)

ZeroAltitude said...

(continued)

Does this mean that in general, it is nonsense to say that wage inequalities derive from the need to spend more to attract talent to more needed job positions? Your example convinced me that supply and demand isn’t the only explanation — there are local inequalities that have their history in institutions and tenure and other vagaries of human life. But this example itself captures one of the tiniest slices of the world’s wage earners. Does it generalize? You hint that you think it does by mentioning the case of the corporate manager versus the facility staff in a company. But here my experience does not support your hinted at conclusion.

When I moved from academia to software engineering, wage was absolutely a component of my decision. I was looking at many years of adjunct and assistant professor work at a gradually increasing wage versus an immediately attractive wage even as a beginner engineer. It so happened that I loved both — and this is an interesting thing. How many percent of the workforce is motivated by true love of art, of teaching, of engineering? I think it’s a small percentage, though, unsurprisingly, it’s a lot higher exactly where local wage inequalities are at work. Most of the professors I knew loved something about their job in a way that very few of the engineers I know do. Interesting. I’ll come back to this.

You ask the question of whether the corporate manager would take the janitor job, given all other things being equal. You assume that the answer is no, but my experience does not support this without qualification. There is a vast proportion of managers I work with that just don’t like managing. They do it to climb the ladder. Why? Simply because it is a way to gain a higher wage. Why do we need people in those higher positions? Because organizing people is necessary. But it is so painful. People are by nature chaotic in the aggregate, with so many different histories, motivations, etc. It’s so hard to get them organized. It’s thankless, at times, though it can be rewarding too. I suppose that some managers adore those rewards and truly love the job. But not all. If their love of painting, of landscaping, of wine making, of building, could be just as lucrative, would they remain managers? In my experience the answer is clearly “no.”

(continued)

ZeroAltitude said...

(continued)

And what of the engineers I hire? Hundreds of interviews a year, a treasure trove of data about why people are engineers! Do they all do it because of a natural love of engineering, and the wage is unnecessary to attract them? I’m afraid in my experience, this is just not so. I talk for hours each year, almost a hundred hours each year for over a decade, and my conclusion from those conversations is that love does motivate some of them, and a natural inclination towards it, and many other factors. But wage is dominant. My need to acquire 20 engineers in one year requires me to raise my wage — and I get your point that we can bracket competition. Let’s assume I was paying as much as the bakers, the welders, the drivers, the hotel managers, the scientists, the TV personalities, and everyone else. 90+% of my applicants would be applying for all those jobs too, and would most likely take the one that they had an affinity for rather than mine. Engineering is sometimes cool, but like any job, almost all of it is still slogging through technical material and is nowhere near as exciting as say reading Kant or playing guitar or any of a million other things I’d adore being paid to do.

I think there are very real local inequalities in wages for many reasons. Some of them have to do with the tiny slice of the wage earners in a category being strongly motivated by love of something very specific. Some of them have to do with rules, regulations and institutions such as tenure that bend the wage setting in a category. But most still seem to me to be determined by supply and demand and a particular industry’s need to have many, many more people join up and e.g. take up engineering.

Thank you so much for your blog. Take care, Eddie

Chris said...

Silly comic, about Marx, making Wolff's very serious, and not silly, point:

https://existentialcomics.com/comic/136

Richard Lewis said...

But what if you add a further assumption into the thought experiment that there are objective, fixed (from birth) cognitive differences between people, differences which might have been trivial 1000 years ago but which, as division of labor becomes more complex, and labor more cognitively demanding, become more apparent and measurable . In other words if we abandon Marx's blank slatism (I assume that despite his attempt to dedicate Capital to Darwin, Marx was basically a blank slate kind of thinker). Then perhaps Winston just wouldn't be up to Shamus' job cognitively and the idea of an open competition involving both is impossible. Wouldn't that change the numbers? Because at Shamus' 'level' there may be only 2% of the population that could satisfactorily complete those duties, whereas at Winston's 'level' it may be 25%. (Whether that is true or not in academia is not the point, we're talking in general). If the pool of talent is smaller wouldn't supply and demand make salaries higher in that small pool?
Of course I think smart professionals also use their smarts parasitically to vastly over-compensate themselves through cartelization, etc, but still.......

Chris said...

Why assume hes a blank slatist? Theres no evidence for that.

TheDudeDiogenes said...

Indeed. It seems as if those who accuse Marx of "blank slatism" are not familiar with the Economic and Philosophic Manuscripts of 1844.

Chris said...

It seems as if there's A LOT of people in the comments section of this blog, passing along myths and demonstrable falsehoods about Marx, all too regularly. Weird... Marx is seemingly more maligned, by people who never read him, than any other philosopher I can think of. Christ is also in this position (by the entire right wing of the USA).

Absolutely right TheDude! It's seriously doubtful a German philosopher who was well aware of developments in German Idealism, would still be a blank slatist.

LFC said...

Rawls' approach would rule out the level of income and wealth inequality that now exists in the US, irrespective of the difference principle, because that level of inequality contravenes "the fair value...of the political liberties." (TJ, 225) Put more bluntly, it gives the rich excessive influence in politics, which Rawls says is unacceptable (TJ, 1st ed., 225-26).

David Zimmerman said...

It should be said that the Difference principle is conditional in form, specifying that an economic inequality is morally just only if it is necessary for those in the bottom quintile [say] to be as well off as they are with it. If, on the other hand, the inequality could be eliminated without worsening their condition, then it is not just.
To be sure, Rawls does often state the DP in such way that he leaves all-too open the possibility that these conditions are frequently meant in a capitalist economy, for example, when he characterizes the inequalities it would permit as a "reward for services rendered." But his official version, as I read him, is thoroughly conditional, in a way that would entail that most economic inequalities in the US today are strictly unjust.

David Zimmerman said...

I should add that Rawls does encourage the impression that he thinks the DP justifies more inequalities than it probably does, most especially when he makes so many references to incentive, and the thesis that compensation needs to be high in order to attract talent to certain roles. Of course, that is one of the ideas that Professor Wolff quite rightly debunks in this contribution to the debate over inequality, partly with the parable of the chairman and the janitor.

In post- T of J writing, Rawls does claim that his two principles are compatible with both capitalism and socialism. However, it is unfortunate that he makes so many concessions, often by implication, to the existence of wide inequalities under the former.

LFC said...

Since other parts of Rawls' theory impose limits on inequality in addition to or separate from those imposed by he DP, there's not much point IMO in continuing to discuss Rawls' position on the issue as if the DP is all there is to it. The recent book, mentioned by Matt in comments earlier here, w the perhaps somewhat clunky title _John Rawls: Reticent Socialist_, might have interesting things to say on this point among others.

David Zimmerman said...

I did not mean to suggest the Rawls's DP "is all there is to it" on the question of what economic inequalities he considered just.
What would be the point of that?.....

I only meant to make the, one would have hoped, obvious point that the principal inequality-limiting component of his theory, the DP, does not have the inequality-permitting implications that many of have stated.

David Zimmerman said...

I have a strenuous request of this website, which I think that Professor Wolff will readily agree with----------

I am 77 years old. I find the picture array that we are required to fill out in order to prove that we are not "ROBOTS" very hard to get through in under five, six, seven tries.....

Enough, please!

It is exhausting trying to mark all the fire hydrants, buses, traffic lights, buses, and god knows what else this requires of us to post a simple contribitution.

PLEASE, no more.

LFC said...

When I log into my Blogger/Google account and post that way, the site doesn't require me to go through all that. I sometimes prefer to comment without logging in to my Blogger account and in that case I do have to go through the prove-you're-not-a-robot thing. It sounds like you're having to do it even if you do log into Blogger. I sympathize w the frustration but I'm not sure whether Pr Wolff can do anything about it.

Dean said...

I don't usually encounter the image array at all, thought I'm usually logged into a Google account (but not per se a Blogger account). Note, too, that I post with my name, not with my Google identity. Usually, all I have to do is check the reCAPTCHA. I view the blog on a Chromebook (running Chrome, obvs), on a Windows machine running Firefox, and on an Apple machine running Firefox.

Matt said...

Rawls does claim that his two principles are compatible with both capitalism and socialism.

This isn't right. Rawls says that it's compatible with both "property owning democracy" and with "liberal socialism". But, he never says it's compatible with "capitalism" full-stop, and denies that it's compatible with "welfare-state capitalism". It's clear (and explicit) that it's not compatible with laissez faire capitalism, "classical liberalism", or anything like that.

(What both "property owning democracy" and "liberal socialism" mean is unclear, and not something that Rawls himself settles in any satisfactory way, but there is a large and often interesting literature around each idea for those who are interested.)

Richard Lewis said...

Sorry, a bit late responding to Chris: but I don't think pointing to the early manuscripts is an answer. When I said Marx is or would have been a 'blank slatist' I was being too vague. Of course in the early manuscripts he is an Aristotelian: he seems to believe there is a universal human potentiality (species being) that is then distorted by class hierarchies and more recently by capitalist commodification.

When I said Marx was a proto 'blank slatist' I was trying to imply that this story, in which anyone can be a fisherman in the morning and a critic in the evening sits awkwardly with a view (inspired by modern genetics) that people have inherent, unchangeable and measurable potentialities that might put them on a spectrum of ability, and that that spectrum might determine where you end up in a class hierarchy.

I'm sure a lot of Marx would survive being fused with such a (bleak) view, for example the theory of alienation and of exploitation are orthogonal to it, but at the very least, it would change the emotive force of many of his arguments. If where you are in the class hierarchy is mainly due to where you stand in a spectrum of genetically given potentialities, then a theory of class conflict will have a different character, perhaps implying the bleak conclusion that capitalists (and capitalist-managers) tend to be smarter than workers and thus the psychological conditions for revolution (thwarted but equal human potentialities) are unlikely ever to be met.

Raph Shirley said...

This article is fundamentally concerned with a moral defence. Is that appropriate? Could we try a technocratic defence? For instance what policy could reduce inequalities and what impacts would it have. The simplest to me seem like a hard limit on pay ratios in an organisation. Suppose it became illegal to have a ratio between the highest and lowest paid full time staff of some value (2? 3? 10?) what impact would it have? Once argument against that springs to mind is the this would affect large organisations more than small ones since the more staff you have the larger the larger the pay at the top typically. Since larger firms tend to have larger economies of scale would this policy give smaller firms a comparative advantage and reduce overall efficiency in the economy? I'm not sure at all but I find moral justifications in general to be less interesting than comparisons between concrete policy proposals. Any moral justification for the current price of a chocolate bar for instance has no bearing at all on my decision of whether to buy it.

Daniel said...

I agree that competition between universities can be set aside, but can competition between industries/careers be set aside? I don't think so. To ask how to justify paying the chair so much more than the staff, don't ask whether the chair would be happy to do the staff's job absent the pay differential (I agree, realistically, even without the pay differential, the chair would probably rather stay chair). Rather, ask whether the chair would be happy to switch to a more lucrative field (or, more realistically, would've gone into some more lucrative field before grad school) if the earning prospects of going into academia were the same as the earning prospects for working the front desk. There, I think the answer is much less clear.

I also think academia is a particularly poor field to use for this sort of argument, since so much of the "compensation" in academia is non-pecuiniary (schedule, post-tenure job security, intrinsic interest of the work), compared to the other fields which attract people with similar backgrounds to academics (e.g., law, medicine, finance). Would the lawyer breaking her back with an 80-hour-a-week schedule of stressful, high-pressure cases prefer to switch places with the janitor, absent the pay differential? In many cases, I think the answer is yes.

Ultimate Philosopher said...

I'm not following. I assume you're all familiar with Nozick's example of Wilt Chamberlain, and the $100K salary. Well, today, the top sports stars (think Mike Trout, Tom Brady, LeBron James) make upwards of $40M a year, an even greater cause of disparity compared to what, oh, say, the concessions workers make.

Concessions workers are readily replaceable. Mike Trout could do concessions work, but there's comparative advantage. The concessions workers can't do what Trout does.

True, if Trout were offered the same wage or salary as the concessions worker makes for playing baseball, his love of playing baseball would still lead him to prefer the baseball playing.

Heck, we're talking about people who play a game for a living, and have fun much of the time doing it. Many of the concessions workers are stuck doing whatever their skill set qualifies them for, and they're likely not having much fun much of the time. They have to deal with lots of stupid and crappy customers, for example. They're perhaps acutely aware that they don't have the talents that the customers are coming to pay the most money to see. Etc.

But Trout is commanding what the market will bear, enjoying a big surplus over what he *would* be willing to play baseball for. (And on top of that, there are performance metrics these days tied to the concept of "Value Above Replacement Player," and Trout is shooting up the career leaders list there at almost astonishing speed. And even a replacement-level player, ready to be knocked down to AAA, has talents that are in-demand enough to make several hundred thousand a year. [We can bracket for now baseball's antitrust exemption, particularly given that the customers prefer to watch as undiluted a talent pool on the field as is consistent with a few dozen big cities, but not many more, having teams.])

And so, I ask along with Nozick, where is the injustice exactly? Is commanding what the market will bear unjust, or lacking in justification? (Of course, you should all know Nozick's justification by now: it's what people choose to do with their holdings.) (There's also Robin Hanson's rather mangled attempt to apply leftist reasoning about justice to the market for sexual and/or romantic partners. Guess what: a lot of people are SOL there no matter what they do, while a select few can get "10" partners even if they *would* settle for 7s. [Hanson's "creepy" in-jest proposal to force the more fortunate to have sex/romance with the less fortunate can be toned down to something more like a system of tax incentives/disincentives, something much more to the liking of statists who insist on separating human rights from property rights.] The point being, life isn't fair, but you sure get a lot of selective outrage about that from anticapitalists who, to a lot of procapitalists, appear to be rationalizing envy. A retort along Rawlsian lines is that what is fair is not nature but how we as a society respond to such natural unfairness, e.g., to maximize as much as possible the opportunity set of the least advantaged. Nozick's rebuttal is something to the effect that what's fair is when I dispose of my life as I choose, i.e., that it isn't others' to dispose of [and that otherwise nice-sounding ideas about maximin should be left to people to implement voluntarily {for which a good place to start might be philosophy for children, for which see the SEP entry there}]. Oh wait, that's originally Hospers/Rand....)

UP/CRC

Loren said...

Your arguments are thought-provoking, but also unconvincing for at least three reasons:

(1) The Human Capital justification should be more nuanced than you give it. Let us assume, as you do, that the average worker earns $44,000/year. (This number is probably inflated already, because it includes college-educated students.) Even if college is funded by the state, college students forego $176,000 over the four years they are at college (as you mentioned, just correcting the number). Your metric is "mak[ing] that back over a forty-five year work life [leaving aside inflation, amortization, etc etc etc] ". It isn't clear to me why that should be the metric. Why shouldn't we look instead at immediate ROI?

(2) Even if you ignore competition between universities (and I don't think you should; I believe that does drive some of the wage discrepancy), I don't think we can compare the departmental chair to the support staff, as you do. We can extend the Human Capital example from before. Let's just assume that a professor only needs a four-year college degree and a five-year PhD while support staff needs neither of those things. Assuming college and PhD are fully funded, that is still $352,000 in foregone earnings. Assuming a 40 year work life (based on your previous metric, less five years for the PhD), Kahn would need $8,800 to break even. But even in that case, income equality is still permissible (even if gross income inequality, which you say you are ignoring for argumentative purposes, is not)

(3) Perhaps you might want to say, "Sure, but you're missing the point. The point is that a professor would prefer to be a professor all else being equal." Maybe, but I also don't think "professor" and "support staff" are appropriate substitutes. Let's take economics, for an easier example. Let's take a trained economist. She can presumably choose between economics positions in academia and the private sector (banks, think tanks, etc.). The economist might always prefer an economics professorship to being support staff or private sector, if salary is always equal. But if the private sector offers a higher salary (which I think is reasonable to assume) she might prefer that option. To convince her to be a professor, we need to offer her a salary greater than $44,000/year. If we think economics professorships are valuable, then we might think this justifies a higher salary for economics professors