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A Primer on Wealth
From a strict supply & demand perspective, the amount of money you receive in the form of wages and benefits is a result of the match between your skill set and the need for those skills in marketplace. If there is a high demand for cooks and you happen to be a cook, you'll earn more. But you don't always know what professions are going to be bidding high. If you get into a "hot" area, it is likely to be glutted by the time you get there.
Unfortunately for economists and those deranged by Horatio Alger stories, the strict supply/demand model, and the notion that the "most competitive" will win, is simply untrue. Betamax made a better videotape than VHS but they went out of business. And there is the additional little problem that institutions can shape the pattern of competition. We have decided that manufacturing workers in the U.S. have to compete with workers in China and Mexico, but that lawyers don't. We have also decided that you need an expensive degree to practice law (reducing the number of people who can practice), while being a sanitation worker doesn't.
If you have a good job, great for you. But remember this: employers receive a stack of resumes for every desirable job, and frequently make decisions that can only be interpreted as arbitrary You can't really tell what someone is like from a resume. There were a ton of other people who were qualified for your super high paying job that didn't get the job, and no one will ever know why.
There are also a number of factors that control why some people in a given profession make more than others in the same profession. Let's say that you and I are both working in the same kitchen as chefs. You might be better looking than me, or funnier than me - things that have nothing to do with the job - and might get a raise whereas I don't. Or you might be willing to work longer hours unasked (who knows what price you will pay for this at home). There is also the possibility that you are a better cook than I (or even just seem to be). Given our "winner take all" culture, you might be a 10% better chef, but make twice as much. It is also possible that you happen to be related to the boss. Or you're sleeping with him.
I won't even bother discussing the proportion of people who are wealthy through no actions of their own, but because they happen to be clever enough to choose the right parents. If you want to be rich, it doesn't hurt to have Bill Gates as your father.
I am not saying that those who are economically successful don't deserve any of their wealth, that they haven't worked hard, or that they aren't capable people. What I am saying is that there were hundred of other people who work just as hard and are just as talented as you are, but who make a fraction of what you do. I also want those who have benefitted from our country's wealth to recognize that while everyone in America is contributing to the growth of the economy, only a very tiny number of the people are seeing any of the returns. There is something very wrong when a company makes a billion dollar quarterly profit, doubles its CEO's already fat salary, and the people who actually do the work don't see another dime. They're just told that they're lucky to still have a job.
So sure, it's great that wealthy people are willing to give some of it away, Marriah. But wouldn't it be better if there were fewer people who needed philanthropy? How about instead of you demanding a million dollar benefit package, you give your secretary a bit of raise and not outsource her job to India?
C'mon. Whaddya say?
8 Comments:
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Wealth has little to do with moral desert. I blame Marx for coming up with the idea of the labor theory of value, as if the value of a product can be measured through labor, and the worth of labor can be measured by the amount or quality of the product. Wealth is all about providing a service to meet the needs of other people. The more people who benefit from your service or product, the wealthier you get. The problem you are pointing to is that economists have coupled habitability with supply and demand. Before the days of capitalism, habitation was guaranteed. Capitalism, in its worst forms, makes your ability to live contingent on your ability to produce. This reverses the natural dynamic. Most people can produce only when they have a stable, safe place to life. Thus, any just society will guarantee everyone a place to live and a minimum amount of food to eat. Economists have coupled habitation with productivity because they erroneously assume that every individual has an insatiable appetite, such that, if you don't couple habitation and productivity, people will consume infinite amounts of resources that society cannot provide for them. However, we have seen that technology is more than capable of providing resources to everyone, and philanthropy provides ample evidence that appetites are not insatiable. Many multimillionaires have more money than they can ever spend.
By
So, you have misidentified the problem. You imply a tradeoff between people getting very rich while the rest of society suffers. I don't think that tradeoff exists. Economics is not a zero-sum game in which, if I get rich, you must, ipso facto, be poor. Rather, the state can easily provide a minimum of welfare just as it provides public utilities such as water and electricity, and public goods such as transportation.
When I read an article about people getting very rich, that tells me I can do it too, and that pleases me. However, that does not negate the responsibility of government at all levels to provide for the poorest members of society.
We need to have a culture that promotes giving instead of consumption. A single multibillionaire can easily be replaced by hundreds, if not thousands of millionaires, with no increase in suffering. We just need to develop mechanisms to get the very rich to voluntarily share their wealth.
Marriah, at 6:50 PM
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And, yes, I agree that CEOs should be promoting higher wages for regular employees instead of trying to cut costs in order to raise to value of their stock portfolios. However, the real problem here is the public ownership of corporations by shareholders instead of private ownership. Public ownership inevitably leads to short-term moves to cut costs and increase profits for shareholders. With the public financing system offered by IPOs, corporations get big enough to completely shut out innovative but smaller competitors. The stock market is then decoupled from the real wages of the employees. That's a recipe for economic disaster.
By
Simple solutions: eliminate stock options as a source of employee wealth, and, raise the threshold in size and earnings for companies to go public. It is extremely unjust for the top management of a corporation to get hundreds of millions from stock options that increase in value only because American workers are deprived of high-paying jobs that are now in China and India. Reforming stock options as executive pay will eliminate that perverse incentive. Marriah, at 10:48 PM
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YOu are talking about the macroeconomic level. I'm talking about the micro level - at the level of the firm.
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While the PRICE of something is determined by supply & demand, the WAGE someone receives is a product of internal management decisions. If a company makes a given profit, it can pay its employees whatever it likes. In very real terms, there IS a zero sum game. For every dollar that goes back to shareholders, a dollar is NOT given to workers.
I think your idea for abolishing joint stock companies is a little radical. You would need to demonstrate that there is a significant different in wages between private and public companies, which I doubt.
In addition, your solution of providing a "minimum" does nothing to preserve a middle class or fairly distribute the social surplus. All it does is prevent revolution - for a while. Arbitrista, at 10:00 AM
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Even at the micro level, economics is not necessarily a zero-sum game. A company can be structured in a variety of ways, but the best way is to promote collective ownership of the company, like General Electric or General Motors. However, since SEC regulations currently require a company to go public once it reaches a specific level of income and employees, it is best to promote collective ownership on a small scale. The Koreans have figured out how to do this, as well as many other small firms. The family usually owns the store or chain of stores, and everyone is made a co-owner, or co-earner, so that the wealth is distributed to each employee. The extra wealth is then put into a general pool that provides capital for expansion. As long as everyone is made a partner, everyone bears collective responsibility, and thus everyone gets and equal wage.
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There is a big difference between public companies and private companies, and it has been demonstrated well over the past couple decades. Public firms must deal with temporal pressures - quarterly earnings reports - that private firms do not have. Therefore, private firms can plan farther ahead and make better decisions. SAS and Southwest Airlines are good examples of firms that have managed to make life very good for their employees. SAS provides for the collective welfare of its employees - free health care, day care, recreational facilities, on-campus housing, etc. Those employees then feel empowered to do a better job for the company's clients. The employee retention rate is high, so the extra funds normally allocated for recruitment can go to the employees. The happy employees produce happy customers who remain loyal to the company, and thus the company, and its customers, begin to act like a family.
It is impossible for a big, public corporation to invest so much in all of its employees. Only Google seems to achieve the right balance. The product is free, the stock price goes ever higher, and employee compensation rises as well. Marriah, at 11:16 AM
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Public companies paid their workers well when unions existed. Why not revive them?
By Arbitrista, at 11:17 AM
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In order to revive unions, you need to have government policies that promote union membership and side with unions when there is a dispute. Thus, when unions strike, the government needs to come down on their side. The sole exception is when the service provided is public. In that case, unions shouldn't be allowed to strike.
By Marriah, at 11:19 AM
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Money is the root of all evil. Ownership of property is immoral.
By Dr. Brazen Hussy, at 8:12 AM
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"Money is the root of all evil. Ownership of property is immoral."
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I disagree. The LOVE of money is the root of all evil. Private Property is immoral, but public property is fine. The love of money induces a person to neglect relationships and hurt people in order to get more money. Private Property facilitates the love of money over people. Collective ownership of property puts people before money. Marriah, at 12:26 PM
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