The problem here is that the comparison is between median wages and total productivity, without demonstrating that the median worker is in any way responsible for the increased productivity.
If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people?
I'm not necessarily saying they aren't, just that such an argument should be made explicitly.
Rather than being an ethical or moral question of whether they "deserve" (i.e., they're only deserving of it if they are directly responsible for it) a better wage or not, why not just look at it like an indicator that the overall economy might be becoming less healthy?
A low-income earner is more likely put any extra money they acquire towards the local economy rather than, for example, lodging it in the Cayman Islands for storage. This is good for keeping the local economy healthy, from which may come the next person to create a technological breakthrough.
We generally want the median person to have money to spend with our businesses rather than slowly edging towards living in a slum.
> why not just look at it like an indicator that the overall economy might be becoming less healthy?
Because it isn’t. We have other indicators for that and GDP growth is one of them. Median wages are affected by so many factors that they invalidate such conclusions. Also, wages aren’t the only money available for spending, there‘s capital income too.
Let's not resort to such vage speculation. Low-income earners definitely have more to spend than unemployed people and unemployment is rather low right now in the USA.
The point wasn't particularly about a person with $1 having more resources than the person with $0, but how healthy the local businesses in an area are given how many dollars are in circulation around it, and what the trend of this looks like. That is, in the medium-to-micro, not in the macro economics.
Anyone who has ever had a body is probably familiar with the concept of the whole seeming OK, while there's something unhealthy happening in the small. I'm not rejecting other metrics, but I don't think this is irrelevant to the economy at large.
The comment you're replying to pointed out that the absence of a wage or presence of a low wage probably does not correlate with an equivalent amount of passive income for the vast majority.
You reject this and call it "vague speculation", for which I assume that the alternative theory is that there's a substantial majority of passive income earners at the bottom of society. It's an interesting theory.
> You reject this and call it "vague speculation", for which I assume that the alternative theory is that there's a substantial majority of passive income earners at the bottom of society. It's an interesting theory.
It's possible. More economically savvy people = more early retirees. Higher rents could also be a factor (some people might be able to sustain their families with previously worthless property and low wages). Let's not call these people "bottom of society" though. I know a few with 0 wages and 7 figure capital incomes.
Something like 40% of Americans have zero savings and would be ruined by a medium health emergency or unexpected car repair. What are you talking about.
Can anyone be said to be responsible for the increase in productivity? It's probably largely a matter of increased technology and automation, as well as cultural improvements like the way we work and organise work. These are mostly collective efforts.
Sure you can point to any individual employee and declare "you didn't invent or buy that computer that makes you work more efficiently, so why should you get more money?", but the CEO or shareholders didn't invent the computer either, and buying a PC is a fairly small expense, so why should they be the ones to benefit from the increased productivity?
Because they hold power and the regular employee doesn't. I think that's the only real explanation for this discrepancy: CEOs and shareholders have power, while the regular employee doesn't, and that power imbalance means more money goes to the CEO and shareholders.
> Sure you can point to any individual employee and declare "you didn't invent or buy that computer that makes you work more efficiently, so why should you get more money?"
It's less about that as it is about your three remaining employees being rewarded handsomely for the highly productive work they do on their computers, but the seven who you let go and who now work at Walmart are no longer paid wages that are coupled to that increased productivity.
And that's the core of the problem. Wages used to go up with productivity, but not anymore. Plenty of money is being made, it just doesn't end up in the wages of regular employees.
A couple of years I came across a claim that compared to 50 years ago, the ratio between a CEO's salary than that of a regular employee of the same company, has shot up by one or two orders of magnitude. CEOs make way more than they used to, regular employees don't.
Sorry there is a huge causal relationship if not the only reason. Wealth is not relative dollars but purchasing power. In a system where a hat maker and a shoe maker double their production, they respectively see no "wage increase" but they are both twice as rich.
Productivity -> more goods/services -> richer society, wages be damned.
> the CEO or shareholders didn't invent the computer either, and buying a PC is a fairly small expense, so why should they be the ones to benefit from the increased productivity?
Because the company owns the computer, and the work done by it. The employee is paid to do that work, and the CEO is paid to do their work. The company (and the market) decides what they are willing to pay the CEO, the worker, and the share holders, and each of those parties agrees to it. These are not slaves, none of these people are forced into these agreements against their will.
> Because they hold power and the regular employee doesn't. I think that's the only real explanation for this discrepancy: CEOs and shareholders have power, while the regular employee doesn't, and that power imbalance means more money goes to the CEO and shareholders.
Or because they are worth less in the market than the CEO is. What those parties have is "leverage" and "marketability" and "ownership", not some evil "power" construct. Ownership is available to general employees in a co-op, and people are free to join them, or start their own companies. If they choose not to, that's their choice.
The issue is not that CEOs make more money than regular workers. Of course they do. But CEO salaries and bonuses have exploded, while regular worker salaries have stagnated.
If that's not enough to tell you something wrong, then consider that even failing CEOs, CEOs of companies going bankrupt or in other kinds of trouble, still get multi-million dollar bonuses.
It really is power. You can call that power "leverage" or "ownership", but it's still power that regular workers don't have.
Shall we also discuss how much of other people's work capital is 'entitled' to?
E.g Uber's executives are very well compensated, and are nothing but middle-men. Middle-men that are easily replaced, as demonstrated by the Uber clones in cities that banned Uber.
It's very strange for you to argue that executives pay mostly income tax. From the perspective of a corporation, their main concern is paying corporate tax. The people who own the shares then make gains from capital gains.
Uber is a growth company, so we can expect that corporate tax has little effect on them, for the simple reason that they're not making much money (by design). Still, their capitalization has some notion of corporate tax baked into it, because if they become a giant and start returning earnings to owners, then this will be impacted by corporate tax.
I don't like that we have this complicated system of double-taxing corporate earnings at lower rates, as opposed to taxing earnings as income for the owners of the company. I know that many companies find ways to skirt corporate tax... but not all, and not really the majority (but preferentially the huge companies). I also know that the combination of these two taxes may not total to what the individual owners would have otherwise paid if the earnings had been ordinary income. Still... it's not as simple as "capital gains".
"...many companies find ways to skirt corporate tax... but not all, and not really the majority (but preferentially the huge companies)"
So that's basically the case for progressive corporate tax. Everyone acknowledges that small/medium business pay the full tax rate, while large/huge corps always never anything close to it. With progressive taxation you can directly impact the latter and not the former.
Why tax productivity at all? A land value tax redistributes gains in productivity to the government in the form of tax levied on the value of land - the value of the improvements on the land.
'Easily' in terms of labor. But it was only possible to create an opening for that labor with the use of law - i.e. collective action. Just like how FAT32 is also easily replaced, yet Microsoft reaped patent profits from it for decades. There are countless other such parasites.
It seems pretty naive to think these market mechanisms are the primary factors affecting wages. Maybe this is the case in the US, certainly not in Europe. Otherwise teachers and caregivers would earn at least as much as engineers.
Top managers wages are completely fictitious. Investors generally don't care though, since it is basically nothing compared to turnover as a whole.
Context: A lot of countries in Europe have problems filling positions with teachers and caregivers, because younger people tend to evade these careers because of bad economic conditions and huge workloads.
It's my opinion that taxpayers are the worst people to drive business decisions around education. The median tax payer will only care about education quality and availability for around 15 of their ~40 years as a tax payer.
For those remaining 25 years, they will tend to prioritize money in their pockets over a teacher's salary; a situation that does not align with the betterment of our society at large.
A million dollar teacher won't be able to do their job effectively if the child lives in a broken environment, so it's something that has to be attacked from all angles simultaneously, from the teachers, to providing the child's parents (and neighbors) with economic opportunities (and/or educating them), and even then it would be a slow process taking effect over generations, so no politician could claim it. Seems almost impossible to accomplish in a democracy.
There are plenty of million dollar teachers, but they work in private tutoring or corporate education positions.
The million dollar teachers will do things like actively manage the student's home life or business trajectory, give them personalized curricula, connect them with opportunities to gain hands-on experience, etc.
Not saying you're wrong re: the incentives or anything, but a lot of people don't even know this segment of the market exists.
You have named the very reason the teachers are angrily protesting any and all attempts at evaluation of teachers' productivity. Or introduction of private (i.e., market-based) schools competing with the state run ones.
> If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people?
With most salaried, white collar jobs your payscale is almost completely decoupled from your productivity. You are paid based on the market value of your skills and experience. You're essentially a commodity.
We see this in the software industry all the time: There's little salary difference between a "good" and "mediocre" programmer. The so-called "10x" engineer, myth or not, is likely to make just 10% more than their peers, if even that, not 1000% more.
I'd expect that eventually the so-called "10x engineer" (if they have any kind of business acumen) eventually finds their way into a role where they are paid proportionally to their productivity, whether that's by becoming a business owner or by an explicit profit-share arrangement.
In the meantime, of course, it's as you say - and in fact they may be paid less, because they're spending their energy on engineering instead of political maneouvering.
“eventually finds their way into a role where they are paid proportionally to their productivity”
I don’t think that’s true. There are plenty of people who do great work but aren’t good at necessary self promotion. Or they just want to stay where they are. So they are very productive but are paid pretty much like everybody else.
I have had the pleasure of working with several truly outstanding engineers over the last few decades. My experience is that they're generally happy if they get to keep doing what they love and excel at (coding) and don't mind that they're "only" paid 1.5-2x the industry norm for Joe/Jane Average programmer. Joe/Jane are getting paid enough to be very comfortable and 1.5-2x that is extremely comfortable.
>There's little salary difference between a "good" and "mediocre" programmer.
An essential condition for things to be commodities is that they're fungible. If we accept that your "good" and "mediocre" programmers are commodities, there's no basis to call them "good" and "mediocre" because they're fungible to their employer. And if there's a basis to do that, how are they fungible ?
> If we accept that your "good" and "mediocre" programmers are commodities, there's no basis to call them "good" and "mediocre" because they're fungible to their employer.
Being fungible doesn't imply that there is no quality difference between goods. It just means the quality difference is irrelevant to the purchaser. Stationeries are viewed as commodities by most businesses but I can still distinguish a good pen from a bad one.
> The so-called "10x" engineer, myth or not, is likely to make just 10% more than their peers, if even that, not 1000% more.
That doesn't seem right. An entry level programmer will make around $100k. There are definitely engineers out there that are paid more than a million a year
I don't know what bubble you are living in where 100k is an entry salary (besides the crazy high cost of living sf / NY metro areas) but in 90% of the US outside tech hotspots entry level programming jobs are as low as half as much, especially in the Midwest.
FWIW, the Boston area is also ~$100K for new college grads at a "tech matters to us" company (which makes somewhat less sense to post now that the parent comment has been edited...)
I know several programmers that are many times more productive than their peers, when compared to least-performing peers it's easily 10-20x. They make a little bit more, I'd guess 20-30%.
Not in the US, but I'm sure this is quite common and compensation anywhere near reflecting the performance is a rare exception.
>I know several programmers that are many times more productive than their peers, when compared to least-performing peers it's easily 10-20x. They make a little bit more, I'd guess 20-30%.
I'm not saying the system is perfect at identifying who's the 10x engineer and who's the bum. But once identified there is definitely a gap in pay roughly equivalent to the difference in production.
Which system is identifying the 10x engineer? What generates that gap in pay? It sorts of sounds like you are trying to fit reality into a model and not vice versa.
Sorry for a late reply. In most companies outside the US nobody, not even the CEO, makes 10x the income of an average low-performing engineer. A high performer has a chance of getting a respectable salary only by rising to CTO or similar roles, which obviously require skills other than just project contribution.
There is literally zero chance a high performer would get even 3x salary compared to their peers. Those pay ranks simply do not exist.
If you have a good development stack that is properly tuned to your niche, a good portion of the work should be domain analysis, not raw coding. If your bottleneck is coding, your stack is probably wasteful, bloated, and/or buggy, creating unnecessary busy-work. Orgs often over-follow fads or grab trends from industries that don't match their own, rather than tune or clean their existing stack. Rewarding those fast at unnecessary busy-work usually just multiplies unnecessary busy-work.
Nowadays within couple of hours while sitting in front of the computer I can plan and book my holidays, submit a bank transfer, submit tax declaration, buy new clothes, and extend the insurance. Unthinkable until the late 90s. This technological leverage is created pretty much by a "median worker". Where the margins from this turbo-raise of productivity go? Because they certainly don't vanish neither reach the worker.
You can do all of this in one evening instead of over the course of a month. That is how it reached the average person. The average worker did not contribute to making this happen, but they benefit a lot.
The margins go in the consumer's pocket and that of the owner of the services you are consuming + you are consuming higher quality services/products.
Also, as the consumer, you pay with your own free time: every time you self check-out, do your own accounting, tax fillings and so on, you are doing (a bit less) work that was done by an employee in the past.
So the margins mostly go to the owners of the services you are consuming (i.e. tax haven accounts).
Self checkout at as implemented in local shops has odd value proposition for the shopper. Basically it is more hassle and marginally faster for the benefit of allowing the shop owner to fire some people. Compare this to handling bank transfer at your own home computer or mobile phone versus going to the bank during business hours.
I'd hardly call the time since the invention of computers and the Internet "from now until the end of time".
And what the toolmaker "deserves" is decided in negotiations between the toolmaker and the people who pay for the tools. It seems they've decided that these tools are worth quite a lot.
It seems you're telling me that stagnating wages for increased productivity is fine, because the extra productivity is from better tools, not more work, which means the workers don't deserve the extra revenue from their increased output, is that right?
So if you're a farmer, and you're given a new kind of tractor that doubles the yield of your fields, you'd be totally fine if your landlord just took the extra crop for himself, leaving you with exactly the same amount as you would have had without the new machine?
The average worker today produces far more in an hour than the average worker from the '70s did in the same time. And while I get that the increase is not uniform across all workers I am sure it is an increase.
What is the reason for keeping wage tied to time rather than productivity or work, other than a quest for ever increasing profits? And if the wage can't be increased why not decrease the time? This way the worker gets a reduction in time for the same wage and the employer still gets a hefty productivity increase over a few decades ago for the same wage.
I see some countries have actually kept wage and productivity tied to each other and it doesn't look like it was detrimental to the economy.
I'd appreciate dissenting opinions in a more productive format like counterarguments rather than a wave of downvotes.
> The people who created that technological leverage are far from median workers, and earn many times the median wage.
If the issue was, as you are implying, one of distribution, we should be seeing income inequality growing while the wage share of the national income stagnates.
That's not at all what is happening. The wage share has been steadily declining since the 80s. The truth is that shareholders not workers got the lion share of the productivity increase.
More and more aggressively creation and maintenance of these systems are being outsourced and nearshored to the cheapest available location, ideally employing on-demand workforce.
Re: If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people?
Other people? The rich? Or even machines? There are several questions raised here.
Even if we go with the presumption that the rich are simply more productive/useful and "deserve their income", that still doesn't answer the question of why inequality is increasing.
Did the rich simply start to get significantly better than the rest around 1980? Instant evolution? Or perhap the economy is becoming "winner take all". The more you control the more you CAN control. For example, the big tech co's have huge patent portfolios in which to sue any upstarts from entering their turf. Their big competitors have their own giant portfolios to defend against each other's patent claims via counter-suits. Thus, smallbies are essentially locked out, forced into niches.
Even if we assume they deserve their big incomes, it could still pose a risk to democracy as the rich buy influence. The Supreme Court more or less has concluded money is free speech, meaning the rich (and corporations) can speak louder than the rest. Their point of view gets splattered everywhere and counter arguments from regular folks get drowned out. And there is campaign donations, which is legalized bribery, which the Court also upheld. The rich can use their influence to get even more politicians and judges in play which favor the rich, creating a runaway train of influence. "Slippery Slope" is often considered a debate fallacy, but we are sliding into inequality in practice. Sliding does sometimes actually happen. Unions are being gradually stripped of power by politicians and the courts, for example.
Therefore, even if one accepts that the rich deserve most their money, their spending power may have the practical side-effect of undermining democracy and equal representation.
And, how many mansions, Maseratis and swimming pools does one "need" to be sufficiently rewarded? 7?, 20?, 82? I thought it really telling that John McCain lost track of how many mansions he owned.
If we assume it's machines that have generated the increased total wealth, then obviously machines don't want nor need money (although I'm working on a Greed-A-Tron). So who gets it? The owners of the machines typically do, but are we just rewarding them for simply owning more machines than you and I? Owner take all?
> Did the rich simply start to get significantly better than the rest around 1980? Instant evolution? Or perhap the economy is becoming "winner take all". The more you control the more you CAN control. For example, the big tech co's have huge patent portfolios in which to sue any upstarts from entering their turf. Their big competitors have their own giant portfolios to defend against each other's patent claims via counter-suits. Thus, smallbies are essentially locked out, forced into niches.
The argument is not quite "winner take all" but as the article said "winner take most". We have increasingly become a knowledge economy. Technology has created a multiplier effect, where the productivity of the top decile or so of performers is magnified significantly by software and other things, making them have even more of an edge over the bottom 90%.
This isn't a competition between 10% of the workers and 90% of the workers. There isn't a fixed amount of money allocated to 'labour'.
It's a competition between the capital/investment cycle of the economy and the labour/consumption cycle. In this case it boils down to leverage in employment negotiations. Those 10% crackerjack hyperworkers you're theorizing exist would be even BETTER off if they were recouping a larger amount of the margin they were producing.
I'm not sure I understand your point. My point is simply that those 10% are better able to capture the value they create, whereas the bottom 90% are not. I'm not making any assumptions about a fixed-size pie.
The point is, those 10% aren't better able to capture the value they create. They're just in a more favourable position from the perspective of the labour market. It doesn't mean that the fact that they are 'knowledge workers' is giving them magical new tools to outperform everyone else. It just means they're in demand because the market is vomiting money at tech companies, so tech companies are sucking up every developer resource they can find in their sprint for growth.
You can make developer bucks working as a blue collar worker on an oil rig, or as a normal dude on a fishing rig. These people aren't making cash because they're 'knowledge workers'. They're just supplying labour to a field with solid demand.
But average IT worker wages have also more or less stagnated. By some accounts we have done somewhat better than the rest, but most the expansion is on the wealthy end. Therefore, it's not just the ability to automate.
When work is automated the productivity comes from owning the automation, not doing it. Meaning that the top 0.1% who owns all the automation are taking most of the gains. This is only possible thanks to the top 10% selling all their automation work to the top 0.1% for cheap.
Okay, but most owners own out of luck or family, not because they are special. Or, they did one thing special at the right time, which then allowed them to start accumulating ownership in a snowballing fashion. Most of Microsoft's well-known products were purchased from/as start-ups or small co's.
> If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people?
I usually turn this question around: as a programmer, I'm responsible for a greater share of productivity than some people in different functions who are paid less. However, I do not work harder, do not sacrifice more, do not hate my job more - more likely the opposite, even. Why am I entitled to a larger share of profits than other people?
(I understand that the system generally "works better" this way. However, since we're talking about being entitled to something, I wonder if there's a moral argument that can be made.)
imagine a laborer who works double the hours you work, exhausting his mind and body more in a single hour than you do all day. but all this mind and back breaking work is to create ugly mud sculptures, unwanted by all but the most eccentric connoisseurs. do you think he is entitled to even greater compensation than you, because he works harder? would you find it fair if he were compensated exactly the same as you?
No, I don't think he's entitled to greater compensation than me - because I don't have a good rule for determining how much either of us should be entitled to earn. In a moral sense, that is - I understand that me receiving better compensation helps to prevent ugly mud sculptures from being created. That doesn't make me feel entitled to my compensation, though.
You're entitled to your compensation because someone of your skill level is needed to get the job you do done. Yes, others may suffer more but the result is what creates value, and the results of their work are less than that of yours. And if your work required more suffering, it would probably pay more too.
Basically, your compensation is based on the face-value of the results of your work, as well as the difficulty necessary in order to be capable of doing such work. So for other positions that require more work-per-hour, they get less usually because a greater population is capable of that same work. (and so, someone somewhere can be found to do it cheaper)
I think that seems to be missed a lot in discussions of this nature, the value of training and the scale of populations with given skills and how more training generally means less people and therefore less who are desperate and will take a lower than standard wage. (while with unskilled positions, it's automatically a race to the minimum)
Well, that's a direct connection between someone producing value and receiving it, and why we're running the system this way, but that doesn't quite cut it for me as a moral code. For example, if one is entitled to the value they produce (to the extent that that can be properly measured), why would we take care of the disabled, or the elderly?
Because empathy (one day we will be elderly too), and because they did contribute value throughout their lives. In return for that, they earn respect and care. On some level, it is a selfish empathy (if I help this old person, it helps normalize that helping old people is a thing we should do, and then I can cash out on that when old), but maybe all empathy is anyways...its ok if its selfish internally if the result is consistently positive.
> I don't have a good rule for determining how much either of us should be entitled to earn.
I don't have an objectively provable rule, but I do have one that makes a pretty good starting point: if you create something valuable, you should be able to capture most (or even all) of that value.
of course, no one just creates things from scratch. they use tools designed by other people, they use resources extracted from the earth, their productivity might be multiplied if directed by a good team leader, etc. if you take the final product and subtract all the tools, resources, and infrastructure used, you have your personal contribution. I think we should strive for a system where the worker keeps as much of their contribution as possible. some people's contribution will be much larger than others', depending on their skills and the type of work they do, but I don't think this is inherently unfair if you have first accounted for all the external things they have benefited from.
But what about people unable to work? What about the elderly, the disabled, or, as more and more gets automated, those no longer able to provide more value than robots? If our moral code is limited to "you are entitled to the value you create", then those people would be left out - and I think that's inconsistent with the rest of my moral code.
It doesn’t matter how “hard” you work, but the value of the work - and value is 100% determined by how much people will pay for your output, and that price is determined by the scarcity of your product.
A guy that digs gold out of the ground is going be able to sell that gold at a higher price than a guy digging worms; while working at exactly the same “hardness.” There are those that would suggest that both should be paid the same, which is ridiculous as that suggests a pound of worms is as valuable as a pound of gold.
Sure, that's how the system works, and why it works well in order to make sure gold gets dug out of the ground rather than worms. That makes it a justification for doing things this way, but it's not a justification for me, personally, feeling entitled to the money I receive.
> Why am I entitled to a larger share of profits than other people?
You aren't entitled to profits at all. Profits come after cost. You're cost. You cost more because the demand for your labor versus the supply of your labor raises the price of your labor.
Don't assume this will go on forever, the next bust may well wipe out the huge wage advantage of today's tech workers.
Sure, I'm not assuming this will go on forever. The main point of asking my question was to get a grip on a moral framework for justifying... I don't know, private property?
1) No one treats everyone else's property as well as their own (tragedy of the commons).
2) The fact that you are paid more ensures that society's demand of your kind of labor is met, resulting in a more efficient allocation of resources. If everyone instead was paid the same, there would be less incentive to get better training or to perform undesirable work, resulting in less efficient allocation of resources.
Yes, that's the reason we're doing things this way, but that's not a moral reasoning. If it were, that would mean being opposed to e.g. being taxed to take care of the disabled. I'm wondering whether there's a way to reconcile those two in the same moral framework.
> Yes, that's the reason we're doing things this way, but that's not a moral reasoning.
It is moral to allocate resources more efficiently, as it increases well-being and reduces waste.
> If it were, that would mean being opposed to e.g. being taxed to take care of the disabled.
Not at all. A society which allocates resources more efficiently has more resources available to deal with such problems. It is also in the self-interest of every individual to be taken care of, should they become disabled.
The (im)morality of using taxation to this end (as opposed to voluntary charity and private insurance) is a separate debate altogether.
> I'm wondering whether there's a way to reconcile those two in the same moral framework.
>If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people?
If the median worker isn't responsible for the increased productivity, it follows trivially that you can do something to increase the median worker's productivity, earning higher profits, until all firms in your sector do it and you all end up having to compete for the increasingly productive workers by raising wages.
The most likely inference, a priori, for where this process has broken down is: employers aren't having to compete for workers very hard any more, so competition doesn't push labor prices up.
Indeed, _total_ productivity should be compared to _average_ wages. The difficulty is that, at the higher end of income, the distinction between wage, business income (eg consultants), and investment income (eg stock based compensation) is not clear.
If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people?
I'm not necessarily saying they aren't, just that such an argument should be made explicitly.