I recently participated in a student seminar at a large state university. We were discussing readings by Adam Smith, John Locke, Jean-Jacques Rousseau, and others. One student appeared to have a fairly strong attachment to Marxist and socialist ideas. I found myself grateful to him because his participation vastly improved the conversation.
At one point, he ventured a critique about the different amounts of money people receive as pay for their work. “What one human being can do is not that different from what another human being can do,” he said. “It doesn’t make sense that the reward for the work would be so different.”
Not All Human Work Is Created Equal
When freshmen member of Congress Alexandria Ocasio-Cortez recently complained about the mismatch between the cost of an airport croissant and the minimum wage—implying that an hour of one’s labor should be worth much more than the croissant—I noticed the connection between the two sentiments.
Croissants at LaGuardia are going for SEVEN DOLLARS A PIECE 😱— Alexandria Ocasio-Cortez (@AOC) April 1, 2019
Yet some people think getting a whole hour of personal, dedicated human labor for $15 is too expensive??
Both the student and Ocasio-Cortez value human work as though it is essentially undifferentiated—a hallmark of Marxist-style thinking about economics. But anyone who has had to manage people or ever been responsible for delivering a good or service will tell you that the view of labor as fungible is totally wrong. Even if I confine my analysis to people who do very similar jobs, it won’t be hard to establish the fact that contribution levels can differ dramatically.
Why is that important? The answer is that it is absolutely critical to have the ability to pay high performers for their work. In simple pragmatic terms, high performers who receive the same pay as those who provide much less through their efforts (either because of slacking, lack of skill, attitude, etc.) Justice requires different pay for different contribution.will feel disheartened to see that their superior dedication, talent, and work ethic do not earn a premium.
To go beyond pragmatism and to elevate the issue, we could simply say that it is unjust to pay the person who works hard and makes a powerful contribution the same as the person who misses several days, makes a half-hearted attempt, and only contributes enough to stay employed. Justice requires different pay for different contribution.
It is interesting to note that, a few years ago, an employer received positive notices for elevating all of his employees to a higher salary of $70,000. The effect was basically to bring several lower paid employees up to the level of those who were better compensated. Rather than being an unqualified success, the reform brought dissension. Employees who had been better paid than co-workers felt they had earned their higher salaries. They were troubled to see resources employed and rewards granted with no relation to contribution.
Arbitrary Wage Setting
If we arbitrarily assign a value to human labor, we simply fail to take into account the power of incentives to motivate as well as the justice of paying workers according to their contribution. It makes little sense to dictate what work is worth through the political process.
We also tend to see the minimum wage as lifting wages. I wonder if by setting a minimum wage we don’t actually slow more organic wage growth that would otherwise occur by “teaching” employers and employees to think of a potential wage as being somehow suggestive of what is fair and right. It may be the case that wages would be higher and more dynamic in their growth without a legally mandated minimum acting as a kind of anchor for wages in particular sectors of the economy.
The most just economy will be one in which workers are paid according to their contribution.
The most just economy will be one in which workers are paid according to their contribution. In our best political traditions, we have focused on helping people make their best contribution through education and opportunity rather than by dictating particular results.
With regard to that croissant, if there is an employee who can turn out more croissants than two of his colleagues in an hour, he deserves more and they deserve less, regardless of what the law mandates. A wise business owner or manager would observe that reality and respond to it.