MORE ON WAGE INEQUALITY

I should like today to expand on my rather facetious example of Shamus Kahn and Winston Gordon III [see July 4^th above] because I seem not to have made myself adequately clear.  The question is whether, leaving aside the costs of preparation, the present structure of inequality in wages and salaries is required to attract the right people into the appropriate jobs.  This is going to take a while, so get yourself a cup of coffee and settle down.

Human beings, as Marx observed, live by purposefully and collectively transforming nature so as to satisfy their needs and desires.  For at least the last ten thousand years and maybe more [we do not know], they have done this by differentiating these activities into roles and functions so that no individual, not even a farmer or hunter, does by himself or herself all of the things required to live.  In a capitalist society, in which some own or control the means of production and hire others to use those means to produce goods for sale – which is to say commodities – most men and women live by holding down a job and being paid a wage or a salary.  In virtually all modern capitalist economies the structure of wages and salaries is steeply pyramidal, with large numbers of low wage jobs, rather fewer middle wage jobs, and a small percentage of high or even stratospheric salaried jobs [numerically large, of course, in a country with 330 million people.]

To what extent, if at all, is this inequality in compensation necessary to motivate those with special and rare skills to prepare themselves for, and then to fill, those jobs whose effective performance requires those rare and special skills?   And can that supposed necessity explain the existing structure of compensation?

First things first.  We know that the current structure of compensation is not necessary because not too long ago [at least as old guys like me measure time, which is to say in the Fifties and Sixties of the last century ] the structure of compensation was a good deal less unequal in the United States with no measurable shortfall in efficiency.

Second, let us please not commit some form of the inverse of what logicians call the fallacy of composition.  No doubt if all else is held constant, a single company [or university] will have to pay a big salary to hold onto an employee in demand or to woo one away from a competitor. I am asking a different question:  Is the structure of unequal compensation required to get the people in society in general who are best suited for the jobs currently highly paid to seek out and take such jobs?  I am suggesting that the answer is no.

One way to think about this is to imagine that the entire American economy is one vast corporation – USA. inc. – with agricultural, manufacturing, service, technology, educational and other divisions whose total output each year is the Gross Domestic Product.  Suppose as well that there are no corporations elsewhere in the world that might bid for some of the employees of USA inc.  Each year, young people are tested by the employment office to determine which jobs at USA inc. they are best suited for.  Jobs requiring further schooling carry with them scholarships to pay for that preparation.  Don’t get hung up on the details.  Tweak this any way you wish to suit your cavils.  Now, let us suppose pay is to be equal, save when higher pay is needed to attract the right people into the key jobs.  What would happen?

Well, if too few people choose to be maintenance personnel, sweeping floors, emptying trash baskets, cleaning toilets, and washing windows, then it might be necessary to raise the wages of those jobs to fill them.  If a great many people want to be division managers, and if testing shows that there are more well suited people wanting those jobs than are needed, then it will not be necessary to raise the pay associated with those jobs above the social norm.  And so forth.

Note, by the way, that in such a system, the social norm would probably be a good deal higher than the current median wage, and way higher than the wages now paid to scores of millions of low wage workers.

In such a system, would anyone at all choose to be a brain surgeon or a tech software developer or a corporate manager or a Sociology professor?   I suspect they would when confronted with the list of all the other available jobs. 

What should those folks be paid?  In thinking about this question, it is extraordinarily difficult to break away from our deeply embedded assumptions about the lifestyles appropriately associated with certain jobs.  Since no one reading this blog is a corporate bigwig, I imagine, it is easy for us all to nod and say, “Yes, there is no reason why a corporate CEO needs a yacht and a private jet.  Why shouldn’t he or she be content with a three bedroom house in a nice suburban neighborhood?”   But if I suggest that perhaps a board certified oncologist and a seamstress should live comparable lives, the soul rebels.

By the way, note a related point not always acknowledged:  the larger the pool of young people considered appropriate candidates for the key jobs – the more women or African-Americans or Latinx, or LGBTQ people one includes – the easier it will be to fill those key jobs and accordingly the less likely it is that higher salaries will be required to lure enough suitable candidates to apply.

Well, turn these remarks over in your mind and see whether they somewhat alter your settled assumptions about the rationale for the wage and salary pyramid.