Have you ever thought that nurses don’t get paid fairly for the work they do? Have you ever wondered if six-figure incomes (plus bonuses) for investment bankers are justified?
I bet you have, as probably everyone has.
Do bankers bring so much more worth into our society then nurses? Same goes for teachers. They have to cope with 20-30 students, when most people are unable to handle three children at a time!
You should think the topic of society-fair compensation is deeply researched by the “economic science”. But it isn’t. Not at all.
In part that is because it is damn hard (and always a bit subjective) to put the “worth” of a work into figures. But then, this is true for nearly all economic research that does not only look at pre-existing numbers.
There is also the problem that science is under big pressure to be “economically efficient”. Ironically that leaves no time for such basic, important research on efficiency. There is just no money to be made in telling investment bankers that they earn way too much.
But do they do this? Or is this just communistic propaganda, aimed at the core of the capitalistic system to bring it down? Do bankers deserve the money they made because they are so incredibly important to the society?
To answer that, the scientist normally starts with gathering data. For example: What happens when bankers go on strike?
Do you remember when your bank was closed due to a strike of the upper 10% in the bank’s monetary hierarchy? Likely not, because banks seldom go on strike.
But sometimes they do, like in Ireland 1970, for half a year. Do you remember the incredibly destructive effect on the economy, which led to the coining of the phrase “destructive like an Irish Bank Bomb”?
Don’t worry, it is not your brain that is at fault. I just made it up. Because the country more or less did go on like usual, probably remembering the WW II motto: “Keep calm, carry on”.
The case is different if other services go on strike: medical staff, teachers, garbage workers. Can you imagine garbage workers going on strike for half a year?
Probably best not to even think about it.
Still, for the income of a single investment banker you could pay all the garbage workers of a small town. Does that look fair?
Externalities and Spillover Effect
Externalities are the costs that are burdened on society for a certain action. “Traditionally” the biggest one was probably environmental damages. A factory was build, steel was made, and the fumes killed man and bird alike a few miles away.
Spillovers are additional “incomes” generated. For example the state builds a new institute to do “useless” basic research.
If the scientists don’t stumble upon something like Teflon™, they still live there. They pay money for renting a flat and for their cafeteria meals.
The cafeteria needs workers. Some people get new jobs.
Some unemployment pay is saved and taxes are paid.
The cafeteria workers now have money to spend on ice cream. A new ice cream parlor opens in the town. And that one needs an ice cream deliverer to bring ice cream to the scientists who are too busy to go there themselves.
And so on.
Debt, Bullshit Jobs and Bullshit Pay
Still, for all the importance, the effect of certain professions on society is vastly underresearched, not to mention the knowledge in the general public.
Open the door for David Greaber, anthropologist famous for his book “Debt – the first 5000 years”. He has written a new book about Bullshit Jobs. Part of that book is about (or has used) the question: How much contribute the different professions to society?
And after such a long introduction I will keep it short. The numbers speak for themselves. But remember, there is some subjectivity in them, don’t use them in math tests.
The closest I know to such a study that does use such a broader sample was one carried out by the New Economic Foundation in the United Kingdom, whose authors applied a method called “Social Return on Investment Analysis” to examine six representative occupations, three high-income, three low. Here’s a summary of the results:
The “top 3” of big pay, bad result for society:
- city banker – yearly salary c. £5 million – estimated £7 of social value destroyed for every £1 earned;
- advertising executive – yearly salary c. £500,000, estimated £11.50 of social value destroyed per £1 paid;
- tax accountant – yearly salary c. £125,000, estimated £11.20 of social value destroyed per £1 paid;
The “top 3” for low pay, big positive impact:
- hospital cleaner – yearly income c. £13,000 (£6.26 per hour), estimated £10 of social value generated per £1 paid;
- recycling worker – yearly income c. £12,500 (£6.10 per hour) – estimated £12 in social value generated per £1 paid;
- nursery worker – salary c. £11,500 – estimated £7 in social value generated per £1 paid.
(Disclaimer: There are a lot of exceptions to the high pay – low value / low pay – high value rule. But looking at the big picture, the rule holds true.)
If you think it is not coincidentally that the “top of flops” are three professions that help the rich getting richer, while the opposite are professions that keep everyone else healthy, you are probably right.
What the reasons are – nobody knows for sure. That needs more “unproductive” and boring basic research. But maybe, just maybe, we as society should insists of getting that ROI.
source: David Graeber on linkedin