What’s a Job Worth?

It is one of the most vital questions in a capitalist economy, and it’s almost always defined in money terms. In the not so distant past there use to be some occupations in religious or nonprofit organizations that were measured according to other standards. Today, virtual every job carries a monetary value and the gap between those at the top and those at the bottom has never been greater.

There are various estimates of this gap, but it’s generally accepted that the average private company CEO today receives well over 300 times the pay of the median American employee.  Some 50 years ago the typical CEO made 20 times what the median worker did.

This gap did not develop overnight.  It’s been in progress for some time, and it has a cumulative effect.

In 1980 the top one percent of Americans shared about eight percent of national income, while the bottom 50 percent received 18 percent.  In 2010, the one percent at the pinnacle of our economy enjoyed over 20 percent and the bottom half’s share plummeted to 12 or 13 percent.

Corporate leaders, their wealthy allies and their servile panderers in politics and the media argue wages and salaries in the US economy are set by the “market.”  Whatever the “market” will bear is what any job should pay. 

This answer portrays the “market” as some mystical, disinterested entity functioning beyond the control of human actors.  

Adam Smith, the father of capitalism, in his The Wealth of Nations begged to differ:

What are the common wages of labour, depends everywhere upon the contract usually made between those two parties (workman and master), whose interests are by no means the same.  The workmen desire to get as much, the masters to give as little as possible…

Smith also recognized who enjoyed the advantage in these negotiations:

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into compliance with their terms.  The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen…In all such disputes the master can hold out much longer….Many workmen could not subsist a week, a few could subsist a month, and scarce any a year without employment…. 

This has been the age-old story of modern capitalism.  A major objective of FDR’s New Deal was to restore some balance in this struggle by putting government’s hand on the scales in favor of workers, but in recent years, the natural advantage of management Adam Smith noted has been weaponized with an aggressive legislative and judicial agenda to undermine the collective bargaining capabilities of American unions as well as to make it more difficult for them to obtain financial support from the workers they represent.

A prime example of how distorted the struggle has become is the long running battle over increasing the federal minimum wage. The last time it was adjusted was 2009 when it was set at $7.25.  Obviously, it has lost significant purchasing power in the interim.  In fact, the federal minimum wage had its highest real value in 1968, when it was $1.60 per hour, $11.65 in 2018 dollars.

Under the circumstances, the argument for an increase to $15 an hour seems reasonable. On an annual basis that works out to $31,200, approximately half today’s median household income for a family of four.  Payroll and Medicare taxes would reduce the $31,200 to less than $29,000, by no means a luxurious living.

Why in America should anyone willing to work be paid less than $15 an hour?  Why should any employer expect someone to work for less? If an employer cannot pay a “living” wage, why should the job exist?   

The US has a $20 trillion economy.  Approximately 205 million Americans are in the workforce meaning a per capita national income of about $60,000.  Obviously, things are out of balance when so few  of those dollars flow to workers in the lower wage range.

It is a constant dilemma of capitalism that individual companies generally view labor only as a cost, but for the overall economy, workers are also consumers.  So a viable economic system needs to recognize that duality and the consequent importance of insuring that jobs are available and accessible to all willing workers. 

Some American companies have sought to escape that dilemma by outsourcing its workforce needs and extending its marketing reach abroad.  This has been particularly true in the tech industry.  But recent conflicts with China should be a wakeup call for this strategy, and a reminder that a major source of strength for American capitalism is this country’s commitment to representative government and the rule of law. 

Income inequality weighs heavy on the American economy today and is having a corrosive effect on the concord among our citizens undermining the willingness to find common ground on a host of issues beyond those strictly related to salaries and wages.  It is past time to rein in excessive executive compensation and share the fruits of American prosperity with workers at all levels.