3 ms·

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. T

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.
- tfinniga 12y ago
  There are lots of reasonable reasons to work for less than the value you create. - First, you can never actually reach 100% while working for someone else. If you reached 100%, then the employer would look at you and say "I can make exactly the same amount of money if I employ this person or not. Why should I do it? There is absolutely no benefit to me." - You might want to work on a certain problem with a certain team. For example, let's say I want to work on the next Pixar movie, with the Pixar team. There's no employer other than Pixar that can offer that to me. They can pay me less than I contribute, the only thing they need to guard against is mass defection. - Switching costs. If I am earning 98% of what I would like, switching companies might be not be worth the extra effort. - Other intangibles. Unlike what some economists would like you to believe, not everything of value can be reduced to a single unit (money) and rational decisions derived from that. Things might be of value to me or my employer that aren't included in the value that I create or my salary. These things don't necessarily behave linearly.
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)?

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.
tfinniga 12y ago
There are lots of reasonable reasons to work for less than the value you create. - First, you can never actually reach 100% while working for someone else. If you reached 100%, then the employer would look at you and say "I can make exactly the same amount of money if I employ this person or not. Why should I do it? There is absolutely no benefit to me." - You might want to work on a certain problem with a certain team. For example, let's say I want to work on the next Pixar movie, with the Pixar team. There's no employer other than Pixar that can offer that to me. They can pay me less than I contribute, the only thing they need to guard against is mass defection. - Switching costs. If I am earning 98% of what I would like, switching companies might be not be worth the extra effort. - Other intangibles. Unlike what some economists would like you to believe, not everything of value can be reduced to a single unit (money) and rational decisions derived from that. Things might be of value to me or my employer that aren't included in the value that I create or my salary. These things don't necessarily behave linearly.

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)?