Reproduced here for fair use and discussion purposes. My comments in bold. This post first appeared on RobertReich.org.
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Dr. Reich is, as I mentioned before, a smart and educated man. And, he is obscenely well-paid. But even smart people say and do dumb things. Or at the very least, cannot see past their biases.
It is certainly true that some people are paid much more than they're worth considering their perceived contribution to society, but that's irrelevant. Dr. Reich is operating from a false premise, that is, the value of work is or should be measured people who are not party to the transaction. "Value to society" does not come to bear because society is not paying them, so society has no say.
You see, people do not get paid according to the nobility and value of their work as it applies to the benefit of others, they get paid via a consensual, mutually beneficial private agreement known as employment. There is value willingly exchanged, labor for money.
Pay is a known condition of the employment agreement. People who are "underpaid" entered into the transaction knowing their pay, and yet still agreed to the terms of the employment. In fact, many of them went to college for years in order to obtain the credentials necessary to obtain employment in those "underpaid" fields, all of them knowing full well what awaited them.
So, Dr. Reich's complaint rings hollow.
Others are paid because they own businesses that market products people want and need. These entrepreneurs benefit from the fruit of their labor, their ingenuity, and the willingness to take risks. They exerted the effort, and they benefit according to those parameters, not what society would impose on them.
Still others are highly paid because of some rare or unique skill. Professional sports players possess skills few others have, plus the ability to attract high amounts of revenue to their team. They are paid based on those criteria, plus the relatively small window of opportunity they have for being able to perform at those high levels before getting too old or injured.
Dr. Reich's world view, his paradigm, is quasi-socialist. He resents the idea that people make too much money as if such a thing were possible, that they do it in ways that are not properly beneficial, and that these people might spend their own money in ways that Dr. Reich disapproves of. Why does Dr. Reich get to make this determination?
We know what Dr. Reich himself makes. Shall we pass judgment on that?
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What someone is paid has little or no relationship to what their work is worth to society.
Does anyone seriously believe hedge-fund mogul Steven A. Cohen is worth the $2.3 billion he raked in last year, despite being slapped with a $1.8 billion fine after his firm pleaded guilty to insider trading?
On the other hand, what’s the worth to society of social workers who put in long and difficult hours dealing with patients suffering from mental illness or substance abuse? Probably higher than their average pay of $18.14 an hour, which translates into less than $38,000 a year.
How much does society gain from personal-care aides who assist the elderly, convalescents and persons with disabilities? Likely more than their average pay of $9.67 an hour, or just over $20,000 a year.
What’s the social worth of hospital orderlies who feed, bathe, dress and move patients, and empty their bed pans? Surely higher than their median wage of $11.63 an hour, or $24,190 a year.
Or of child care workers, who get $10.33 an hour, $21.490 a year? And preschool teachers, who earn $13.26 an hour, $27,570 a year?
Yet what would the rest of us do without these dedicated people?
Or consider kindergarten teachers, who make an average of $53,590 a year.
Before you conclude that’s generous, consider that a good kindergarten teacher is worth his or her weight in gold, almost.
One study found that children with outstanding kindergarten teachers are more likely to go to college and less likely to become single parents than a random set of children similar to them in every way other than being assigned a superb teacher.
And what of writers, actors, painters and poets? Only a tiny fraction ever become rich and famous. Most barely make enough to live on (many don’t, and are forced to take paying jobs to pursue their art). But society is surely all the richer for their efforts.
At the other extreme are hedge-fund and private-equity managers, investment bankers, corporate lawyers, management consultants, high-frequency traders and top Washington lobbyists.
They’re getting paid vast sums for their labors. Yet it seems doubtful that society is really that much better off because of what they do.
I don’t mean to sound unduly harsh, but I’ve never heard of a hedge-fund manager whose jobs entails attending to basic human needs (unless you consider having more money as basic human need) or enriching our culture (except through the myriad novels, exposés and movies made about greedy hedge-fund managers and investment bankers).
They don’t even build the economy.
Most financiers, corporate lawyers, lobbyists and management consultants are competing with other financiers, lawyers, lobbyists and management consultants in zero-sum games that take money out of one set of pockets and put it into another.
They’re paid gigantic amounts because winning these games can generate far bigger sums, while losing them can be extremely costly.
It’s said that by moving money to where it can make more money, these games make the economy more efficient.
In fact, the games amount to a mammoth waste of societal resources.
They demand ever more cunning innovations but they create no social value. High-frequency traders who win by a thousandth of a second can reap a fortune, but society as a whole is no better off.
Meanwhile, the games consume the energies of loads of talented people who might otherwise be making real contributions to society — if not by tending to human needs or enriching our culture then by curing diseases or devising new technological breakthroughs, or helping solve some of our most intractable social problems.
Graduates of Ivy League universities are more likely to enter finance and consulting than any other career.
For example, in 2010 (the most recent date for which we have data) close to 36 percent of Princeton graduates went into finance (down from the pre-financial crisis high of 46 percent in 2006). Add in management consulting, and it was close to 60 percent.
The hefty endowments of such elite institutions are swollen with tax-subsidized donations from wealthy alumni, many of whom are seeking to guarantee their own kids’ admissions so they too can become enormously rich financiers and management consultants.
But I can think of a better way for taxpayers to subsidize occupations with more social merit: Forgive the student debts of graduates who choose social work, child care, elder care, nursing and teaching.
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