FOR THE RECORD

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 20^th 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 90^th 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.”