There being a limit to how much I can obsess about the
election, now scarcely more than three weeks away, I have decided today to put
down on paper – or the electronic version thereof – some thoughts I have had for
more than 40 years. I have laid out portions of this in one form or another but
I do not think I have ever pulled it all together in a systematic and coherent
fashion and I would like to do so now -- for the ages, as it were. If I may
characterize this effort in general before undertaking it, I will be attempting
an ideological critique of a standard sociological and, in some forms
philosophical, explanation of the extreme income inequality that characterizes
modern forms of capitalist economies.
To begin at the beginning, the distinctive mark of human
existence, at least for the past 12,000 years or so and perhaps for much
longer, is functional differentiation of productive activities, or as Adam
Smith memorably labeled it, the division of labor. Leaving aside our
prehistoric ancestors, for whom inadequate evidence exists, all of us eat food
we have not grown and processed, wear clothes we have not spun and woven and
tailored, live in houses we did not construct, drive in cars we did not
assemble, and dictate to a computer using programs we did not write.
Marx’s focus was on the contrast between capitalists and
workers, and he seems to have believed that as capitalism developed we would
move more and more into a world in which owners of capital stood over against a
mass of semiskilled and more or less interchangeable workers. The key to his
analysis of this situation was the concept of exploitation. But one of several
important developments in capitalism that Marx failed to anticipate was the permanent
existence of a steeply pyramidal array of unequally compensated jobs, all of
which in the account books of corporate firms stand on the side of “labor” but
whose compensation can vary, in the United States, from a minimum-wage of $7.25
an hour to managerial salaries of millions of dollars a year.
The most sophisticated ideological rationalization of the
exploitative character of capitalism is the theory of marginal productivity,
buttressed by a misinterpretation of a famous theorem by Euler. I have had my
say about that bit of flannery elsewhere and shall not repeat it here. But
there is a more recent “explanation” (which is to say ideological
rationalization) of the job and salary pyramid that owes its origins to early
20th century sociology and has gained credence in philosophical circles
by being taken up in the work of John Rawls. The key to this “explanation” is
the notion that I have labeled the “inequality surplus.” (I first introduced
this phrase in my little book on Rawls published more than 40 years ago.)
I am going to develop my argument by considering in very
elementary fashion an imaginary firm that I shall call Universal Widgets, Inc.
I do not believe that what I have to say will be in any way be weakened by this
bit of creative imagination. Universal Widgets, I shall suppose, is a firm with
100 employees. Ninety of them perform such functions as making the widgets,
boxing the finished product and putting it on trucks for delivery, cleaning
toilets, emptying wastebaskets, serving as secretarial staff, and so forth. The
other ten are management and run the company. All of them are employees and for
purposes of this analysis I am ignoring the question of company ownership.
To begin, let us suppose that with these hundred workers
randomly assigned to the 100 jobs, there is enough money left over after paying
for such things as raw materials and utilities to pay each worker $20,000 a
year – a total labor cost of $2 million. However, it turns out that if each
worker is assigned to the job for which he or she is best suited, the increased
efficiency thereby achieved will swell the sum available for wages to $4
million. Quite obviously, the most natural thing to do is to assign each person
to his or her appropriate task and then raise everybody’s wage from $20,000 a
year to $40,000 a year.
There are, however, two problems with this plan, one of
which can actually be solved fairly easily, the second not so much. The first
problem is that some of the positions in the Corporation require fairly
extensive training, of the sort that may take years. Let us suppose, for the
sake of simplicity, that the secretarial positions require a four-year college
degree and the managerial positions require an MBA in addition, while the
manufacturing, loading, and cleaning tasks only require as much training as is
currently provided by universal free secondary education. Those workers whose natural talents and
abilities mark them for secretarial or managerial positions may be unwilling
both to undertake the expense of college or postgraduate education and also to
be off the labor market for four or six years during which they would otherwise
be earning a wage. The first of these problems can of course be solved by
making college or postgraduate education free, as primary and secondary
education now is in the United States. In addition, the society can provide
support of an appropriate sort for those who have been selected for this
extended period of education.
So much for the difficulties easily handled. The real
problem, of course, is that the people identified as suitable for managerial
positions may not want to take them. Even though they have talents and
abilities that will make them enormously productive in those positions, thereby
increasing the total fund available for wages so much that every worker’s wage
can be doubled from $20,000-$40,000, they may simply not want those jobs.
Indeed, even after it is explained to them that by accepting those jobs they
will be doubling their wages (we will assume that they do not care about the
well-being of their fellow workers), they may be so disinclined to serve as
managers that they refuse to accept the assignment. “This is not the Army!”
They may protest. “I am a free American citizen. You can’t make me take that
job.”
What to do? Well, the story goes, we can induce them to
serve as managers and to undergo the undergraduate and postgraduate education
required to prepare them for that position, by offering them a salary larger
than $40,000 a year. Let us suppose that in order to get the ten individuals
best suited for management to agree to serve as managers, we must pay them $130,000
each, or an additional $110,000, which means that he wages fund must rise $1,100,000. This is where the concept of an inequality surplus enters the analysis.
With the ten individuals best suited for management serving as managers, at a
salary of $130,000 a year each, the wages fund available for distribution will
rise not $1,100,000 but actually $2 million. When the additional $1,100,000
paid to the managers is deducted from this fund, there will be $900,000 left
over, which means that each of the remaining 90 workers will experience a rise
of his or her wages from $20,000 a year to $30,000 a year. The additional $900,000
available to be distributed to the 90 nonmanagerial workers is an inequality
surplus. That is to say, it is a surplus that remains after the unequal wages
paid to the managerial workers are taken account of.
Now then, assuming that the 90 workers are not so envious of
the managerial workers that they would actually prefer to make $20,000 a year
so long as no one makes more than that rather than make $30,000 a year even
though 10 people are going to be making $130,000 each (this is the origin of Rawls’
odd and unexplained assumption of non—envy), the unequal structure of wages in
the company will, by a happy coincidence, be both explained and justified.
To see how bizarre this explanation actually is, let me
change the example a trifle. Suppose that instead of the Universal Widgets
Corporation, we are talking about a philosophy department at a university – oh,
let us say the Harvard University philosophy department. The department we
shall suppose consists of a number of full professors, several staff persons,
and (although no one ever bothers to notice this fact) several people who clean
Emerson Hall, empty the wastebaskets, maintain the grounds and do other
assorted tasks.
Imagine a young man and a young woman in their third year of
undergraduate study who are told that the needs of the society being what they
are, their career options are either to be a secretary in the Harvard
University philosophy department or a full professor in that department. The
two are given a battery of aptitude tests and it is determined that the young
man would be best suited for the secretarial position and the young woman for
the professorial position. These positions they are told are equally
compensated. (At this point I have to fudge with reality by pretending that the
Harvard University philosophy department is a profit-making operation with the
wages fund determined by the income generated by its employees – bear with me.)
“Well,” asks the young woman, “what are the terms of these
two jobs? What does one have to do in each of them?” The person administering
the battery of tests gives the following answer:
“If you become a secretary, you will be expected to work 40
hours a week, 48 weeks a year. You will sit at a desk, handle departmental
correspondence, manage grade sheets, answer the telephone, perform a variety of
secretarial tasks for the professors in the department, and respond to student
inquiries. If you become a professor in the department, you will be expected to
teach two courses or seminars in one semester and one course or seminar in the
other semester. A course meets either three times a week for 50 minutes or
twice a week for 75 minutes. A seminar meets once a week for two hours. Each
semester, allowing also for final examinations, is 15 weeks long. So you will
work 30 weeks a year and have the other 22 weeks completely free of official
duties. In addition to teaching, you will have other obligations including class
preparation, office hours, administrative duties, and – several times each
semester – grading of student papers and examinations. Taking all and all, and
allowing for the fact that once you have prepared a course teaching it a second
time is much less time-consuming, your weekly duties during the 30 weeks a year
that you are working will consume roughly 20 hours each week. To sum up, the
secretarial position calls for you to work 40 hours a week, 48 weeks a year,
and the professorial position calls for you to work 20 hours a week, 30 weeks a
year. The positions are equally compensated. If you are assigned to these
positions without reference to your abilities, then the income of the
department will make it possible to pay each of you $30,000 a year.”
“Well,” the young woman replies, “I would rather be a
secretary if that is what is involved.” The young man is more agreeable and
says he would happily accept either position. Notice that it is essential to
this argument that the young woman prefer the secretarial position because if
she too is agreeable to either job, then the maximum productivity of the
department could be achieved by making the young man the secretary and the
young woman the professor. But the young woman doesn’t want to be a professor,
so some way must be found to persuade her that does not require actually
lowering the salary of the young man.
The young woman is offered $100,000 a year, $150,000 a year,
$180,000 a year, and still she cannot be persuaded. Finally, someone has the
clever idea of offering the young woman a semester off every seven years – the
person with the idea calls it “a sabbatical.” Happily, this is enough to
persuade the young woman to agree to be a professor rather than a secretary and
at $180,000 a year, there is an inequality surplus in the department sufficient
to raise the young man’s salary as secretary to $50,000 a year. Everybody is
happy and the pay structure of Harvard University is simultaneously explained
and justified.
Do I needs to argue that this is nonsense?
Let me end, as I so often like to do, with a little personal
story. My big sister, Barbara, who has just had her 90th birthday
was a phenomenally good student. In 1947 – 48, her senior year in high school,
she was the grand national winner of the Westinghouse Science Talent Search, later
the Intel Science Talent Search. The victory gave her a prize of $2400,
sufficient to pay four years of tuition at Swarthmore College where she
graduated in 1952 summa cum laude in mathematics. She went on to earn a
doctorate in biology at Harvard and ended a long and successful career by
serving as the Ombud of the World Bank. As a teenager, Barbara took an aptitude
test arranged for by our mother who was a secretary at an organization called
the Child Study Association. When she finished the test, the psychologist who
was administering it said to her “you have many great abilities and will go far
but don’t ever be a secretary. You are completely unsuited for that position.”