5 ms·

I think the amount one gets paid is equal to the amount of value one creates for others. After all it's an auction, right? If somebody offers you to pay $8/h y

by get 12y ago

I think the amount one gets paid is equal to the amount of value one creates for others. After all it's an auction, right? If somebody offers you to pay $8/h you will not work for $7/h. And if your work would create an additional $9 for someone, they would happily offer you $8. Minimum wage jobs are an exception to this rule. Because the amount paid is higher then it would be in a free market. We could look at how we can increase the amount paid for minimum wage jobs. But I find it more fascinating to think about how we can make people create more value. So they do not need to compete for minimum wage jobs.

throwaway_xl5 12y ago
The employer will want to pay the least they can to get the job done. This means you will likely get paid an amount less than the value you create for others. There are a lot of cases where you may choose to work for 7/h even though 8/h is on offer elsewhere such as a shorter commute, better hours, or nicer work environment.
- get 12y ago
  This means you will likely get paid an amount less than the value you create for others You are usually not creating more value then you get paid. Just because an author needs somebody to proof read his million-dollar-bestseller, the proofreader did not create millions of dollars. Just because a picker at Amazon picks stuff that makes Amazon tens of thousands in profit, he did not create that value. To create value means to create value that otherwise would not exist.
  - icebraining 12y ago
    You create some value, otherwise the company would not hire you. Of course the picker is not responsible for all the revenue accrued by the products s/he picks, just a part of it.
- ghshephard 12y ago
  Why would an employee work for less than the value they are creating? Seems like irrationally altruistic behavior on their part, or, alternatively, a marketplace in which the employers are not competing for employees (which has been known to happen in Silicon Valley). In general, though - employees who are making less than the value they are creating, will simply be hired by another employer who can profit on that gap. This process repeats itself until the employee has reached the level at which they are making roughly what their value contribution is. e.g. If you have a lawyer who bills out at $500K/year, and is only making $50K/year at Law Firm #1, they will quickly go to a law firm #2 that will hire them for $100K a year, and which will then profit $400K/year from their activity. That lawyer will likely find another job soon at Law Firm #3, where they will make $150K/year, and so on.
  - crc32 12y ago
    The primary reason in a neoclassical model would be a lack of perfect information, wouldn't it. An employee may work for less than the value they are creating when - not being omniscient - they are unable to correctly value their work.
    - ghshephard 12y ago
      That's the best response in this thread, and I think the most correct.
  - aaronharnly 12y ago
    Look at the profit per employee at firms such as Google, Apple, Facebook, and Microsoft. There are a whole lot of people being paid less than the value they create. (Remember, this is profit after expenses and salaries and such) http://www.buzzfeed.com/peterlauria/what-18-of-the-biggest-technology-and-media-companies-earn-p?s=mobile http://www.buzzfeed.com/peterlauria/what-18-of-the-biggest-t...
    - icebraining 12y ago
      That's based on the assumption that only employee labor creates value.
- eCa 12y ago
  "There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." -- Henry Ford http://www.brainyquote.com/quotes/quotes/h/henryford151869.html http://www.brainyquote.com/quotes/quotes/h/henryford151869.h...
  - toomuchtodo 12y ago
    How do you explain Walmart (low quality goods, at the lowest cost possible, while paying the lowest wages possible, going so far as to show your employees how to use government benefits programs because you don't pay enough)?
crc32 12y ago
Yes. To use ghshephard's terminology we would prefer to move people from "low-order" jobs to "high-order" jobs. This has happened somewhat in the past; as he points out with his linked picture. My fear is that instead they are being moved to lower order jobs or are left with no job at all; while the benefits deriving from technological progress are accruing to the relatively few who own the means of production.
MrBuddyCasino 12y ago
> I think the amount one gets paid is equal to the amount of value one creates for others. I get what you mean, but thats not quite true, it is also supply and demand, intelligence, salesmanship, the ability to exploit others, and greed. Of course a software dev can create more value than a picker at Amazon, but if what you said were true or if it were the only rule, there would be a correlation of performance and executive pay, which provably isn't the case.
chrisbennet 12y ago
In the case of very low paying jobs, the employer has externalized some of the cost of the labor. They can get labor cheaper than it's true cost because someone else is paying for the food stamps and health care costs.
tmoertel 12y ago
> I think the amount one gets paid is equal to the amount of value one creates for others. What one gets paid is less than the value one creates. (Otherwise there would be no incentive to pay for that value.)

by get 12y ago

throwaway_xl5 12y ago

The employer will want to pay the least they can to get the job done. This means you will likely get paid an amount less than the value you create for others. There are a lot of cases where you may choose to work for 7/h even though 8/h is on offer elsewhere such as a shorter commute, better hours, or nicer work environment.

get 12y ago
This means you will likely get paid an amount less than the value you create for others You are usually not creating more value then you get paid. Just because an author needs somebody to proof read his million-dollar-bestseller, the proofreader did not create millions of dollars. Just because a picker at Amazon picks stuff that makes Amazon tens of thousands in profit, he did not create that value. To create value means to create value that otherwise would not exist.
- icebraining 12y ago
  You create some value, otherwise the company would not hire you. Of course the picker is not responsible for all the revenue accrued by the products s/he picks, just a part of it.
ghshephard 12y ago
Why would an employee work for less than the value they are creating? Seems like irrationally altruistic behavior on their part, or, alternatively, a marketplace in which the employers are not competing for employees (which has been known to happen in Silicon Valley). In general, though - employees who are making less than the value they are creating, will simply be hired by another employer who can profit on that gap. This process repeats itself until the employee has reached the level at which they are making roughly what their value contribution is. e.g. If you have a lawyer who bills out at $500K/year, and is only making $50K/year at Law Firm #1, they will quickly go to a law firm #2 that will hire them for $100K a year, and which will then profit $400K/year from their activity. That lawyer will likely find another job soon at Law Firm #3, where they will make $150K/year, and so on.
- crc32 12y ago
  The primary reason in a neoclassical model would be a lack of perfect information, wouldn't it. An employee may work for less than the value they are creating when - not being omniscient - they are unable to correctly value their work.
  - ghshephard 12y ago
    That's the best response in this thread, and I think the most correct.
- aaronharnly 12y ago
  Look at the profit per employee at firms such as Google, Apple, Facebook, and Microsoft. There are a whole lot of people being paid less than the value they create. (Remember, this is profit after expenses and salaries and such) http://www.buzzfeed.com/peterlauria/what-18-of-the-biggest-technology-and-media-companies-earn-p?s=mobile http://www.buzzfeed.com/peterlauria/what-18-of-the-biggest-t...
  - icebraining 12y ago
    That's based on the assumption that only employee labor creates value.
eCa 12y ago
"There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." -- Henry Ford http://www.brainyquote.com/quotes/quotes/h/henryford151869.html http://www.brainyquote.com/quotes/quotes/h/henryford151869.h...
- toomuchtodo 12y ago
  How do you explain Walmart (low quality goods, at the lowest cost possible, while paying the lowest wages possible, going so far as to show your employees how to use government benefits programs because you don't pay enough)?

crc32 12y ago

Yes. To use ghshephard's terminology we would prefer to move people from "low-order" jobs to "high-order" jobs. This has happened somewhat in the past; as he points out with his linked picture. My fear is that instead they are being moved to lower order jobs or are left with no job at all; while the benefits deriving from technological progress are accruing to the relatively few who own the means of production.

MrBuddyCasino 12y ago

> I think the amount one gets paid is equal to the amount of value one creates for others. I get what you mean, but thats not quite true, it is also supply and demand, intelligence, salesmanship, the ability to exploit others, and greed. Of course a software dev can create more value than a picker at Amazon, but if what you said were true or if it were the only rule, there would be a correlation of performance and executive pay, which provably isn't the case.

chrisbennet 12y ago

In the case of very low paying jobs, the employer has externalized some of the cost of the labor. They can get labor cheaper than it's true cost because someone else is paying for the food stamps and health care costs.

tmoertel 12y ago

> I think the amount one gets paid is equal to the amount of value one creates for others. What one gets paid is less than the value one creates. (Otherwise there would be no incentive to pay for that value.)