Saturday, September 15, 2018

The Market is Always Right – About the Market

“Employee Salaries versus Contributions to Society” was a recent poll of 1013 people conducted by CreditLoan dot Com. The survey was not rigorous, but it was not all that bad. At least they had a large number of respondents in their convenience sample. The flaws in the poll reflect common errors in philosophy within our broader culture. 

“Hardly a week goes by where we don't hear about a CEO, professional athlete, or celebrity who's scored a multimillion-dollar salary or bonus. Maybe their talent or skill set is worthy of a hefty paycheck, but considering the small amounts paid to teachers, soldiers, and first responders, it makes us wonder if we are underpaying those who perform outside the spotlight.”  

The survey is long and involved. It ranked eleven occupations:  teachers, scientists, social workers, police officers, military, legislators/elected officials, journalists/reporters, transportation security screeners, artists, clergy, and chief executives. It considered Republicans versus Democrats, Baby Boomers vs. Gen X vs. Millennials. So, it is worth looking at for its detail, again, given some warning about its not being perfectly aligned to the standards of sociology research. They do close with an open explanation of their methodology. For one thing, they grouped occupations so that actors, designers, singers, photographers, writers, and dancers are among the “artists” as are sports figures. Nine kinds of “scientist” are listed, as are four types of “military.” Note that security screeners are considered apart from police and military.


The More You Do for Other People the More You Earn


Generally, as the aggregate data shows, the more you do for other people (in their own aggregate estimate), the more you make. That’s how markets work. So, it is erroneous to say that “most people think that teachers are underpaid.”

More to the point, teachers knew the markets before they went to college. They chose teaching anyway.  The same is true of the military. They are not in it for the money—though the money is there if you stop to think about it. 

Occupation
Actual
“Should”
Military
$40,217
$92,033
Farmers/Ranchers
21,076
70,101
Scientists
70,510
109,956
EMT Paramedic
39,675
71,765
Teachers
38,181
70,248

That is one of the problems with this survey. Military people get great healthcare for some ailments such as bullets and burns. Psychological problems have been less well attended. But they get food, clothing, and shelter. On the downside, female Navy officers pay much more than their male colleagues for uniforms. Home mortgages are cheaper; and they can get Basic Allowance for Housing, and Bachelor Officer Quarters subsidy. And housing is determined by cost of living at your home of record. I met a “special forces” kind of guy who was always on the road and whose HOR was Anchorage, Alaska. (Good thinking, Sarge!) After twenty years of military service you can retire and start another career. If you move to another federal agency, you take a lot with you. Even if you go into the private sector, you can cash in on college degrees and other untallied benefits – assuming you live through your employment, a very real untallied cost for many protective services. 
  
And if we could magically triple the pay of teachers or soldiers, what would be the consequences of that? Conversely, if we capped the pay of executives at 60% of this moment’s “average,” would corporations change for the better?

And it is those “averages” that beg so many questions. Granted that “artists” do not make much money on average, Tom Cruise earned $12.5 million for his role in A Few Good Men, which cost $33 million to make. As Deke Slayton said, “Averages only apply to average pilots.” 

Previously on Necessary Facts

1 comment:

  1. This is an interesting post. It brings up a few thoughts.
    1. In my experience workers are bad at articulating the value of benefits (housing allowance, insurance, etc), but in practice they're good at weighing the cash value of benefits when considering jobs.
    2. The what they should make seems silly to me because the economy only has so many goods and services at any one time. It grows slowly. You can't simply wish everyone earned about twice as much as they do; the goods and services they would buy do not exist. Forgoing consumption in favor of making more means of production can make everyone earn more in the long term.
    3. Communications technology allows the one best producer, teacher, business, manager, etc, to share her knowledge over long distances; which means top producers earn more. It's more income inequality, but it's a "good" income inequality if it's just top producers earning more with other people still able to earn by selling their labor and investing some of it in the technologies top producers create and use.

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