This is the sentiment expressed by a colleague of mine. This self-avowed socialist and I were walking back from a seminar together and discussing issues related to incentives, cooperation, and altruism. As we were discussing the role of money and prices in markets, she expressed her frustration at the fact that some people are paid more than others even though all the jobs contribute to the final product. She desires a world where everyone is valued equally. The truth is, the price the market puts on one's time should not be thought of as providing a guide to one's importance or as some measure of objective value. The sad reality of life is that resources are not infinite. This includes human resources. Our time, talents, and brainpower are not unlimited. When communities set goals, be it through the market, the dictates of government, or the wisdom of parents there are going to be some contributions toward those goals that people are not going to want to make just for the fun of the activity. Ceteris paribus (all else equal), some jobs are going to be short of the necessary amount of volunteers. The community then has two options if it doesn't want to give up on the goal: it can create incentives that make more people want to volunteer for that activity (higher compensation, privilege, etc.) or it can force someone to do it against their will. Believers in liberty consider the second option to be offensive to human dignity and well-being in almost any instance. The first option is the most desireable and the market is the most efficient means of choosing the appropriate (i.e. minimum necessary) compensation premium for the task in question. You get paid more than I do not because you are a better or more valuable person in some intrinsic sense, you get paid more because you are doing a job that I am not willing to do for what you get paid (willingness including the effort to become qualified).
Note: This conclusion does not apply to comparisons of pay between professionals and those in training in the same field. For example, a Ph.D. student is compensated to a much smaller degree than their professors even though the Ph.D. student is willing to do the work of a professor. This is based on the assumed inability of the student to do the job.
1 comment:
It's thinking like your colleague's that led to the ERA and all the other "equal pay" bills, including the one Obama is now backing. The problem with these is that it makes no distinction, as you say, for training, experience or competence. In fact, in the latest incarnation, if the law firm I used to work for hired a new receptionist and paid him/her a higher wage than they did me - even though it's now a year later - I could now legally sue them and try to "recover" the gap in wages. How is this fair?
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