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The thesis of the article makes two assumptions: 1. that pay differences are due to merit and 2. employees do not want a merit based system so if they discuss

The thesis of the article makes two assumptions: 1. that pay differences are due to merit and 2. employees do not want a merit based system so if they discuss salaries they will intentionally dismantle that system Both of these assumptions are in error. It is the job of every business man (and likely the instinct of every human) to buy value as cheaply as possible. Thus an employer will tend offer the lowest amount possible regardless of the employees productivity. We know this happens in practice because salary negotiation is at least as critical as technical skill. Additional evidence is that changing jobs results in much higher wage increase than staying put, if wages were connected to skill this would not happen. Likewise fiscal desperation of the employee results in accepting lower wages but if salary is merit based, why were those lower wages were offered in the first place. And of course we know that race, gender, marital status, religion and age were or still are factors in salary. The second assumption is also thoroughly untrue. Typical human behavior is to want compensation proportional to productivity and to live in a system that allows this. The contrary has words like "dishonest", "cheating", "theft" and "unfair" associated with it and is almost universally socially deprecated. It is exactly why grinding in video games are is popular, it taps this very fundamental desire. Which desire is exactly not being met by work so players seek simulated work after hours.

makeitsuckless 11y ago
The problem with the second is the definition of "merit". The usual "janitor versus wall street trader" discussion. Pay isn't based on merit, it's based on value to the employer, which is an entirely different thing.
_yosefk 11y ago
I don't think I assumed what you say I did. That said, your "human instinct" of getting the most in exchange for the least - would it not extend to employees and not just businessmen? Assuming both are equally human, you'd expect people to have a tendency to slack off and to like it when it doesn't hurt their bottom line.
- whybroke 11y ago
  The first paragraph mentions two employees with different salaries. One resents the others and so wants them equalized. If the difference is _not_ merit based then equalizing the salaries is a _good_ thing. Since the articles states equalizing is a bad thing, there is a hidden assumption that inequality is due to merit. Likewise you do not want decision makers to be deterred from giving raises to some and not to others. This behavior would only be desirable if those raises were merit based. If they were not merit based than they should indeed be deterred. etc. > Assuming both are equally human, you'd expect people to have a tendency to slack off and to like it when it doesn't hurt their bottom line. Yes, presumably every employee will try to get the highest pay per work unit possible. If they do not know the salary of their coworker and their coworker has negotiated a higher rate then a disparity will exist that is not due to merit but due to negotiation. If they know about this disparity then either 1. they can demand the same rate thus be more meritocratic or 2. (less likely) the low productivity employee will be pressured or have his (lack of) work more reported on by peers. In this case, the resentment you mention is actually a useful thing. If a pay differential is justifiable then the employer will have no problem explaining it to the lesser paid person or, if he gripes, replacing him with someone who produces the same or more per dollar and being better of for it. Put simply, if two employees are paid the same and know it but one spends the day on facebook, the other will demand a raise and the employer will either grant it or loose one of the workers. Any of those three outcomes is an improvement. Put even more succinctly, a system with more open information (eg regarding salaries) will be more efficient than a more information closed system.
  - _yosefk 11y ago
    A resenting B says nothing about their relative merit, just about merit as perceived by A. A usually sees more merit in A than B, C or D. B, on the other hand, tends to overstate B's merit. So no matter how wages are set, and regardless of disparities between salaries, people will find the wages unfair. In this sense equalization is bad because it reveals everyone's wage. The best is unknown inequality. Of course it has own its drawbacks, I was just pointing out this one angle.
IanCal 11y ago
> that pay differences are due to merit I don't see this argument in the article. > Additional evidence is that changing jobs results in much higher wage increase than staying put, if wages were connected to skill this would not happen This can definitely happen if wages are linked to value. You are not identically valuable to all companies, and since changing jobs is something that usually has some general cost/risk associated with it, it's regularly done for larger rather than smaller salary increases.
- whybroke 11y ago
  >You are not identically valuable to all companies This is very true and certainly affects the very theoretically top limit of the job offer. But when deciding compensation the actual calculation is only remotely based on the value the employee brings your particular problem. In practice an offer is mostly based on the employee's current market value (ie how easy it is to get someone cheaper) and how much he is currently making (ie the minimum amount I can offer and still get him to accept) and some social acumen around ability to negotiate a salary. So yes, when you change jobs your salary is more likely to rise if an organization can use you more effectively. But it will always max out based on how easy you are to replace. This and only this is the pay you will eventually reach if you change jobs enough. And that has no connection to the value you produce but is solely connect to the number of people with your skill vs number of openings.
asgard1024 11y ago
While I agree with most of your post, I am not sure this: > Typical human behavior is to want compensation proportional to productivity and to live in a system that allows this. is entirely true. I think humans want "fairness" and in many ways it's different than raw productivity. Two main problems I see: 1. Other things than people (usually called capital) have productivity on its own (unless you believe in labor theory of value, which leads to logical contradictions). If you are paid for your productivity, you are not paid for the excess, things produced by the capital. For example, a new automation is invented which makes you more productive, but you now do less work. How should the surplus be distributed? In fact, I am of opinion that if I would be paid for my actual productivity (my contribution to it as a human being in contrast to contribution by machines and know-how) in modern society, I would be homeless next month. Yet, here I have an above average salary (maybe even global 1%). 2. Totally meritocratic system (say efficient free market, if such thing exists), even if we deal with the above problem, lacks one important things that humans have - forgiveness. Sometimes disasters happen or people are just plain stupid. Without forgiveness or outside help, a single disaster like that can affect you for life. So I don't think "meritocracy based on productivity only" is a desirable system and I am sure I am not alone.
- ojw 11y ago
  Which logical contradictions in labor theory of value are you referring to?
- whybroke 11y ago
  That is very true. Indeed we know fairness is an innate value for us and all primates [1] Likewise "meritocracy" is a very imprecise word depending a lot on what you want to maximize and so, if not focusing on net benefit to humanity, could produce horrendous outcomes. Blindly maximizing wealth creation could be such a mistake but given how much good prosperity usually does for people, it looks like a good starting point. But I believe the article and I are referring to fairness among employees rather than employee vs employer (which is of course also interesting). Specifically, employees comparing wages would create quite appropriate outrage between employees when some individuals receive more for less work. And this regardless of how much or little of the company's produce goes to wages (a separate issue) [1] http://www.nature.com/nature/journal/v425/n6955/abs/nature01963.html http://www.nature.com/nature/journal/v425/n6955/abs/nature01... or tldr; https://www.youtube.com/watch?v=lKhAd0Tyny0 https://www.youtube.com/watch?v=lKhAd0Tyny0
novaleaf 11y ago
So I don't think the #2 assumption (measurement of merit) is necessarily in error. measurement of merit could imply KPI (known performance indicators), which may include things like lines-of-code counting, application usage monitoring, etc..... and discussing implementing those things, most developers will cringe. Some may even openly revolt.
- whybroke 11y ago
  Only because there is a (probably accurate) perception that 1. performance indicators don't measure productivity accurately for developers. 2. they are game-able 3. they imply repetitive work such that as fits the metrics. 1 & 2 would obviously worsen an un-meritocratic system. There is not a soul alive who would look at system that could get him a raise doing the work he already does and say no to it. If the measurements were accurate then you would only get objections from unproductive people. Since everyone objects including the good performers whom it would theoretically advantage then known inaccuracy is the obvious reason. Also, if the measurements were accurate and people quit over it, then rather than being horrified you would be delighted that it was so easy to locate unproductive people. Just as people who know a lie detector test is nonsenses will avoid it only when innocent, the reaction to KPI metrics is the opposite of what you'd expect.
mrchicity 11y ago
You are spot-on with your point on pay for value. If you want proof of this, look no further than the leaked Sony emails doing a search for "salary" or "compensation." Reviews, metrics, etc. are used only as justification to pay people enough not to leave, even at the highest levels of the organization. The whole process is fake. The number is usually based on salary history, compensation stats from competitors, employee complaints, or having a better offer in-hand. This creates somewhat toxic environments where the least loyal employees who whine loudest, puff up their importance, job hop, and interview strategically get the best outcomes. The closest I've seen to pay for value is in finance or sales roles, and even that is hazy. Employees in those roles have a few things going for them: 1. Measurable output. A trader or salesman can point to his numbers for the year and know what he's worth to the business. The business can see them and know what's at stake if they deflect. 2. Fewer economies of scale, meaning the individual employee provides relatively more value than the firm does. The typical Google engineer can't re-create Search from scratch, but a hedge fund trader can walk out the door with a great idea to work for a competitor. That's great leverage. 3. Competitive external employment environment. If your salesmen are woefully underpaid, a rival employer will snatch them up since they can pay them more than you while still retaining a solid margin. A lot of these jobs are in "winner take all" economies, so employers will squeeze their margins extremely tight to win talent. 4. Competitive internal culture. Don't ask, don't get. If you are managing millions of dollars or trying to close deals, you're probably the type of person to confidently ask for a raise or bonus.

makeitsuckless 11y ago

The problem with the second is the definition of "merit". The usual "janitor versus wall street trader" discussion. Pay isn't based on merit, it's based on value to the employer, which is an entirely different thing.

_yosefk 11y ago

I don't think I assumed what you say I did. That said, your "human instinct" of getting the most in exchange for the least - would it not extend to employees and not just businessmen? Assuming both are equally human, you'd expect people to have a tendency to slack off and to like it when it doesn't hurt their bottom line.

whybroke 11y ago
The first paragraph mentions two employees with different salaries. One resents the others and so wants them equalized. If the difference is _not_ merit based then equalizing the salaries is a _good_ thing. Since the articles states equalizing is a bad thing, there is a hidden assumption that inequality is due to merit. Likewise you do not want decision makers to be deterred from giving raises to some and not to others. This behavior would only be desirable if those raises were merit based. If they were not merit based than they should indeed be deterred. etc. > Assuming both are equally human, you'd expect people to have a tendency to slack off and to like it when it doesn't hurt their bottom line. Yes, presumably every employee will try to get the highest pay per work unit possible. If they do not know the salary of their coworker and their coworker has negotiated a higher rate then a disparity will exist that is not due to merit but due to negotiation. If they know about this disparity then either 1. they can demand the same rate thus be more meritocratic or 2. (less likely) the low productivity employee will be pressured or have his (lack of) work more reported on by peers. In this case, the resentment you mention is actually a useful thing. If a pay differential is justifiable then the employer will have no problem explaining it to the lesser paid person or, if he gripes, replacing him with someone who produces the same or more per dollar and being better of for it. Put simply, if two employees are paid the same and know it but one spends the day on facebook, the other will demand a raise and the employer will either grant it or loose one of the workers. Any of those three outcomes is an improvement. Put even more succinctly, a system with more open information (eg regarding salaries) will be more efficient than a more information closed system.
- _yosefk 11y ago
  A resenting B says nothing about their relative merit, just about merit as perceived by A. A usually sees more merit in A than B, C or D. B, on the other hand, tends to overstate B's merit. So no matter how wages are set, and regardless of disparities between salaries, people will find the wages unfair. In this sense equalization is bad because it reveals everyone's wage. The best is unknown inequality. Of course it has own its drawbacks, I was just pointing out this one angle.

IanCal 11y ago

> that pay differences are due to merit I don't see this argument in the article. > Additional evidence is that changing jobs results in much higher wage increase than staying put, if wages were connected to skill this would not happen This can definitely happen if wages are linked to value. You are not identically valuable to all companies, and since changing jobs is something that usually has some general cost/risk associated with it, it's regularly done for larger rather than smaller salary increases.

whybroke 11y ago
>You are not identically valuable to all companies This is very true and certainly affects the very theoretically top limit of the job offer. But when deciding compensation the actual calculation is only remotely based on the value the employee brings your particular problem. In practice an offer is mostly based on the employee's current market value (ie how easy it is to get someone cheaper) and how much he is currently making (ie the minimum amount I can offer and still get him to accept) and some social acumen around ability to negotiate a salary. So yes, when you change jobs your salary is more likely to rise if an organization can use you more effectively. But it will always max out based on how easy you are to replace. This and only this is the pay you will eventually reach if you change jobs enough. And that has no connection to the value you produce but is solely connect to the number of people with your skill vs number of openings.

asgard1024 11y ago

While I agree with most of your post, I am not sure this: > Typical human behavior is to want compensation proportional to productivity and to live in a system that allows this. is entirely true. I think humans want "fairness" and in many ways it's different than raw productivity. Two main problems I see: 1. Other things than people (usually called capital) have productivity on its own (unless you believe in labor theory of value, which leads to logical contradictions). If you are paid for your productivity, you are not paid for the excess, things produced by the capital. For example, a new automation is invented which makes you more productive, but you now do less work. How should the surplus be distributed? In fact, I am of opinion that if I would be paid for my actual productivity (my contribution to it as a human being in contrast to contribution by machines and know-how) in modern society, I would be homeless next month. Yet, here I have an above average salary (maybe even global 1%). 2. Totally meritocratic system (say efficient free market, if such thing exists), even if we deal with the above problem, lacks one important things that humans have - forgiveness. Sometimes disasters happen or people are just plain stupid. Without forgiveness or outside help, a single disaster like that can affect you for life. So I don't think "meritocracy based on productivity only" is a desirable system and I am sure I am not alone.

ojw 11y ago
Which logical contradictions in labor theory of value are you referring to?
whybroke 11y ago
That is very true. Indeed we know fairness is an innate value for us and all primates [1] Likewise "meritocracy" is a very imprecise word depending a lot on what you want to maximize and so, if not focusing on net benefit to humanity, could produce horrendous outcomes. Blindly maximizing wealth creation could be such a mistake but given how much good prosperity usually does for people, it looks like a good starting point. But I believe the article and I are referring to fairness among employees rather than employee vs employer (which is of course also interesting). Specifically, employees comparing wages would create quite appropriate outrage between employees when some individuals receive more for less work. And this regardless of how much or little of the company's produce goes to wages (a separate issue) [1] http://www.nature.com/nature/journal/v425/n6955/abs/nature01963.html http://www.nature.com/nature/journal/v425/n6955/abs/nature01... or tldr; https://www.youtube.com/watch?v=lKhAd0Tyny0 https://www.youtube.com/watch?v=lKhAd0Tyny0

novaleaf 11y ago

So I don't think the #2 assumption (measurement of merit) is necessarily in error. measurement of merit could imply KPI (known performance indicators), which may include things like lines-of-code counting, application usage monitoring, etc..... and discussing implementing those things, most developers will cringe. Some may even openly revolt.

whybroke 11y ago
Only because there is a (probably accurate) perception that 1. performance indicators don't measure productivity accurately for developers. 2. they are game-able 3. they imply repetitive work such that as fits the metrics. 1 & 2 would obviously worsen an un-meritocratic system. There is not a soul alive who would look at system that could get him a raise doing the work he already does and say no to it. If the measurements were accurate then you would only get objections from unproductive people. Since everyone objects including the good performers whom it would theoretically advantage then known inaccuracy is the obvious reason. Also, if the measurements were accurate and people quit over it, then rather than being horrified you would be delighted that it was so easy to locate unproductive people. Just as people who know a lie detector test is nonsenses will avoid it only when innocent, the reaction to KPI metrics is the opposite of what you'd expect.

mrchicity 11y ago

You are spot-on with your point on pay for value. If you want proof of this, look no further than the leaked Sony emails doing a search for "salary" or "compensation." Reviews, metrics, etc. are used only as justification to pay people enough not to leave, even at the highest levels of the organization. The whole process is fake. The number is usually based on salary history, compensation stats from competitors, employee complaints, or having a better offer in-hand. This creates somewhat toxic environments where the least loyal employees who whine loudest, puff up their importance, job hop, and interview strategically get the best outcomes. The closest I've seen to pay for value is in finance or sales roles, and even that is hazy. Employees in those roles have a few things going for them: 1. Measurable output. A trader or salesman can point to his numbers for the year and know what he's worth to the business. The business can see them and know what's at stake if they deflect. 2. Fewer economies of scale, meaning the individual employee provides relatively more value than the firm does. The typical Google engineer can't re-create Search from scratch, but a hedge fund trader can walk out the door with a great idea to work for a competitor. That's great leverage. 3. Competitive external employment environment. If your salesmen are woefully underpaid, a rival employer will snatch them up since they can pay them more than you while still retaining a solid margin. A lot of these jobs are in "winner take all" economies, so employers will squeeze their margins extremely tight to win talent. 4. Competitive internal culture. Don't ask, don't get. If you are managing millions of dollars or trying to close deals, you're probably the type of person to confidently ask for a raise or bonus.