I set my own salary this year. I have never gotten to do that before, but there was nobody else around to tell me what I should be paid, so I had to do it myself. I don’t require much in expenses, and I didn’t want to siphon too much out of Current Affairs (which is still in its infancy), so I paid myself $34,000. I could have taken more, but it felt like it would be arbitrary and I wanted to spend the money commissioning new magazine pieces instead.
What did I “deserve” to get paid? I do not think there is an answer to that question. There are different possibilities for what I could choose to be paid, each with different consequences for both me and the magazine. But unless we define “what I deserve” as synonymous with “what I choose to pay myself,” we can’t quantify my desert. We could figure out how much money the organization could afford to pay me before it went bankrupt, but we can’t jump from this to a normative conclusion about what I am “owed.” That’s a moral problem rather than a financial one.
When we examine how our notions of “deservingness” match real-world salaries, it’s obvious that they don’t really correlate at all. People say, for example, that you should be rewarded if you work hard and make sacrifices. In practice, the hardest-working people (such as dishwashers and agricultural laborers) are often paid the least, and an easy job in America pays more than an incredibly difficult job in China. As for “sacrifice,” we might think that someone who takes a dangerous and unpleasant job should be paid more than the person who takes a cushy and pleasant job. But the list of most dangerous jobs quickly shows us that the jobs most likely to get you killed aren’t very likely to pay you well for it, and farmworkers, taxi drivers, fishers, roofers, and garbage collectors are the most at risk. On the other hand, being a successful Hollywood actor seems like a lot of fun and you get paid a damn fortune. Hard work and risk-taking often go unrewarded, then, even when people are performing incredibly socially useful jobs. We can offer factual explanations for why this occurs (there are a million roofers and one Bryan Cranston), but “supply and demand” is a description of a phenomenon and not a moral theory for why it is just. Even if you are someone like Robert Nozick who believes that being given something means you deserve it, this is still inconsistent with the Great American Myth that rewards are handed out in accordance with virtue and sacrifice rather than happenstance.
But there are plenty of other rationalizations offered for why CEOs “deserve” to make 270 times as much as the average employee, and why billionaires are morally deserving of their wealth. The economy might not reward hard work or sacrifice. But perhaps it rewards innovation. Ironically, an excellent counterargument to this hypothesis comes from Peter Thiel, in a lecture he delivered at Stanford. Thiel is teaching students how to build successful start-ups, and he points out something that should be quite obvious: financial success is based a lot more on whether you are a sufficiently ruthless businessman who knows how to capture a market than whether you are a brilliant innovator of new scientific and technological breakthroughs that provide value to millions of people. It’s frequently the case, Thiel says, that with “extremely valuable innovations… the people who come up with them do not get rewarded.” The common theory is that “you create X dollars in value, you get Y percent of X” but “the history of science has been one in which Y has generally been 0%…. The scientists never make any money. They are always deluded into thinking that they live in a just universe that will reward them for their work and their inventions, and this is the fundamental delusion that scientists tend to suffer from in our society…”
Thiel says the situation is the same in technology, where those who pioneered technological breakthroughs never received much in return. In the argument that innovation and entrepreneurship is the route to individual prosperity, “innovators” and “entrepreneurs” are often conflated into a single class of people. In fact, innovators do poorly. It is not the person who discovers the cure to a disease who does well. It is the CEO of the pharmaceutical company who figures out how to charge people a fortune to access the cure. These are rarely the same person, because scientists are skilled in coming up with useful things and businessmen are skilled in figuring out how to extract as much money from a useful thing as possible. (Also at bamboozling and exploiting scientists.)
So innovation isn’t rewarded, just as hard work and sacrifice aren’t rewarded. But perhaps people still generally get paid by some objective measure of their contributions. This is a difficult proposition to maintain. A bus driver in Calcutta can take the same number of people the same number of miles and be paid far less than a bus driver in Philadelphia, and a Vietnamese restaurateur in Vietnam can feed even more delicious meals to even more people than a restaurateur in the United States but be paid less. What you receive depends far less on what you do, or how brilliantly/tirelessly you do it, or how many people benefit from it, and far more on where you happen to have been born.
Compensation is often less a reflection of how much value one is generating for other people than of whether one’s customers are rich. Because of the principle of diminishing marginal utility, many of the goods that rich people consume are less valuable to them than they would be to a poor person. A backpack or handbag is far more useful to a person who has nothing to carry their possessions in than it is to a person who already has fifty backpacks and forty-six handbags. Yet someone who is doing something relatively useless for a rich person (such as being Larry Ellison’s “basketball retriever,” whose job is to follow Ellison’s yacht and retrieve balls from the water after they stray from the yacht’s private basketball court) can be paid far more than someone doing something incredibly useful for poor people (such as being a social worker or even a doctor). Market prices reflect “willingness to pay,” but there are gross wealth inequalities, “willingness to pay” is not a measure of the relative value a commodity provides to its purchaser.
We know, too, that CEOs are not paid in accordance with the value they generate for their companies. In fact, the worst-performing CEOs are often the best-paid. That makes sense: poor performance and excessive pay can both be symptoms of an incompetent board of directors that is asleep at the wheel. In reality, how much an executive makes frequently depends on how much they are able to convince people to pay them, and on myriad social factors like their relationships with others at the top of the company, rather than some careful and objective measurement of the value they generate (a figure that is not actually possible to calculate, any more than I could quantify the relative contribution of each Current Affairs illustrator and writer to creating the magazine’s value).
Jonathan Aldred, in The Skeptical Economist, concludes that the major arguments for pay being a reflection of moral desert all fail upon minimal scrutiny. It is argued that compensations reflects people’s burdens and sacrifices, but it often doesn’t. It is argued that compensation reflects people’s contributions, but it often doesn’t. But Aldred also points out how important luck/fortune are in determining outcomes, and if my parents can afford to support me through a series of unpaid internships I might end up with a higher-paying job than a peer who started with less money, but the compensation difference has nothing to do with my own superior effort or talent.
All of this is so simple and obvious that it should not even need stating, but it’s strange how deeply lodged the notion that “people are paid what they deserve” is. The word “earn” helps perpetuate the confusion, by blurring the distinction between “I got what I deserved to get” and “I got what I got.” I earned X dollars this year, but did I earn it? That question seems silly, but it shouldn’t, because the word does have multiple meanings. If I tell my child that she has earned a trip to the beignet festival, I mean that she has done something to deserve it. But the whole question of fair compensation is about whether “earnings” (i.e. pay) equal “deserts,” and if we fudge the distinction we will end up assuming the conclusion we are seeking to examine. In fact, that happens a lot. Since nobody wants to think they are paid more than they are “worth,” we assume that pay is automatically the measure of worthiness, without examining what the implications of that are or whether that conception of worthiness is coherent and meaningful.
It’s important to be careful about what we conclude after finding that hard work, sacrifice, innovation, creativity, etc. aren’t rewarded. We might think that people do deserve to be rewarded in accordance with these measures, and that we should try to make sure that the innovators get rich instead of the parasitic middlemen. This is the kind of assumption underlying arguments for “equality of opportunity” (a concept I dislike, because I don’t think the popular distinction between “opportunity” and “outcome” actually holds). But that doesn’t necessarily create fairness. After all, talent and creativity are at least partially innate rather than the product of sheer willpower, and it’s not clear why it’s fair to give people different rewards on the basis of characteristics they have no power to affect. “Hard work” seems more like a choice, but there, too, capacity itself may be unequally distributed across the population. Here is an excerpt from Edward Bellamy’s 1888 utopian novel Looking Backward, in which an incredulous visitor to the future society is puzzled by the fact that disabled people are paid as much as able people:
“Surely I told you this morning, at least I thought I did,” replied Dr. Leete, “that the right of a man to maintenance at the nation’s table depends on the fact that he is a man, and not on the amount of health and strength he may have, so long as he does his best.”
“You said so,” I answered, “but I supposed the rule applied only to the workers of different ability. Does it also hold of those who can do nothing at all?”
“Are they not also men?”
“I am to understand, then, that the lame, the blind, the sick, and the impotent, are as well off as the most efficient and have the same income?”
“Certainly,” was the reply.
“The idea of charity on such a scale,” I answered, “would have made our most enthusiastic philanthropists gasp.”
“If you had a sick brother at home,” replied Dr. Leete, “unable to work, would you feed him on less dainty food, and lodge and clothe him more poorly, than yourself? More likely far, you would give him the preference; nor would you think of calling it charity. Would not the word, in that connection, fill you with indignation?”
“Of course,” I replied; “but the cases are not parallel. There is a sense, no doubt, in which all men are brothers; but this general sort of brotherhood is not to be compared, except for rhetorical purposes, to the brotherhood of blood, either as to its sentiment or its obligations.”
“There speaks the nineteenth century!” exclaimed Dr. Leete. “Ah, Mr. West, there is no doubt as to the length of time that you slept. If I were to give you, in one sentence, a key to what may seem the mysteries of our civilization as compared with that of your age, I should say that it is the fact that the solidarity of the race and the brotherhood of man, which to you were but fine phrases, are, to our thinking and feeling, ties as real and as vital as physical fraternity.”
Because people have differing abilities, it’s hard to justify pay differentials that reflect those differences in ability as reflecting a person’s moral desert. So even if we did pay people on the basis of their “value to others,” we are still assuming that economic value is the correct measurement of human value for the purposes of determining living standards, which sounds benign until we realize it means disabled people are punished for being disabled due to their “lesser” value. (My colleague Brianna Rennix has talked about the disturbing, borderline eugenicist, implications of making immigration policy decisions on the basis of which immigrants “contribute to the economy” the most in an economy that disproportionately rewards able-bodied male sociopaths.)
Of course, this still doesn’t resolve the “incentives” question: if pay didn’t depend on effort or creativity, people would have a reduced incentive to put in effort and be creative, which would have harmful social effects. And one can still justify pay differences on those grounds, seeing them as a practical necessity for stimulating productivity. But this has nothing to do with “individual moral desert.” It means we might pay people differently because it’s pragmatic, not because we think people get what they are “owed.”
Once you start talking about the distinction between price and value (between what people are paid and what they deserve), you will swiftly be asked how value can be determined if not by price. One reason we stick with pay-earnings as a measure of moral-earnings is because no other measure is quantifiable. That’s not a very good reason to assume it’s correct, though, and a better answer might be that we shouldn’t really think in terms of individual moral desert at all. Pay is a bad measure, but every measure will be bad, because it will be impossible to distinguish between luck and choice. Instead of trying to figure out what individuals deserve as a function of their individual characteristics, then, we might be better off coming up with a concept of what people deserve as a function of their being people. Perhaps nobody has much of a moral entitlement at all, but the moral entitlements we do have are important: to shelter, food, health, security, freedom, and dignity. Everyone deserves those, but beyond that nobody “deserves” much because desert has no additional meaning. I have what I have because I happened to get it, not because there is some cosmic fairness to my getting it.
I recognized this as I was setting my salary: I think I deserve to eat and pay my rent, but beyond that the concept breaks down. Under this conception, some of us get more than we deserve, some of us get less. But the standard doesn’t vary from person to person, and to the extent that differing compensation is justified, it’s not for any moral/fairness reason but a mere practical way of fostering a socially desirable end. Otherwise, people will continue to earn far more than they have earned, both in the sense of deserving far more than they actually receive and receiving far more than they actually deserve.
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