The Problem With Being “Paid What You’re Worth”

In American culture, there is a widespread tendency to determine someone’s social value based on how they earn a living and what they get paid. Setting aside the fact that one’s moral has nothing to do with what sort of job they end up with, how much money you make isn’t really reflective of your personal or professional value either.

After all, some of the lowest-paying jobs in the U.S. include such necessary work as custodial services, care giving, social work, nursing home assistance, and more. Even the fast-food and retail work that is often looked-down upon is valuable, insofar as we rely on these workers to get the goods and services we demand (heck, these aren’t some of the fastest-growing sectors for nothing).

Former U.S. Secretary of Labor Robert Reich highlights the fallacy of this mentality in his recent piece in Salon, noting just how arbitrary corporate pay structures can be:

Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour.

Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive.

The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.

Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom.

Juxtapose this fact with the following one:

If you still believe people are paid what they’re worth, take a look at Wall Street bonuses. Last year’s average bonus was up 15 percent over the year before, to more than $164,000. It was the largest average Wall Street bonus since the 2008 financial crisis and the third highest on record, according to New York’s state comptroller. Remember, we’re talking bonuses, above and beyond salaries.

All told, the Street paid out a whopping $26.7 billion in bonuses last year.

According to the Institute for Policy Studies, the $26.7 billion of bonuses Wall Street banks paid out last year would be enough to more than double the pay of every one of America’s 1,085,000 full-time minimum wage workers.

Does this disparity in compensation truly reflect the worth of these positions and those who work them? Or are is it simply the result of power imbalances between employers and employees, as the latter lack the leverage to negotiate better salaries and treatment due to declining unionization and mass unemployment (which brings down labor costs)? Aren’t the subsidies and tax breaks that are going to corporations and big financial firms — in conjunction with the erosion of worker protections and the minimum wage — also reflected in the way jobs are paid?

In short, there are many systemic, institutional, and political reasons why people make the amount they do. It has little to nothing to do with their individual or collective worth, and everything to do with the vagaries of our economic and political system, which has become increasingly unequal and unfair in terms of how compensation is allocated (e.g. executives and shareholders receiving massive bonuses during profitable years while average workers receive nothing or even endure cuts).

But what do you think?




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