Saturday, October 18, 2014

Thought Experiments in an Equal Pay World

Imagine ... what if everyone could get a job, and every job paid exactly the same? 

The labor market is highly problematic. It doesn't value people or work fairly, rewards destructive behavior (pollution, lawyering, lobbying, finance), and fails to reward socially constructive work (teaching, nursing, mothering, cleaning, farming). It tends to reinforce social hierarchies that have roots in patriarchy and class, perpetuating patterns that have questionable social value. Salary decisions are typically quite distant from business considerations, as CEOs have amply demonstrated, (both on their own behalf and over their minimum wage minions), depending more on the social and power relations of the parties involved.

There are also the persistent issues of gender and race inequality in hiring and pay- conditions that were supposed to have been solved by now, but which rear their heads again and again because of biases in the social system, if not in humanity itself. There is also the appallingly low pay provided by some of our biggest companies and industries (Walmart and farm labor come to mind) that rely on taxpayers to keep their shoddily paid employees fed, clothed, and housed. One way to solve all these problems would be to stipulate that all jobs pay the same wage. That average pay is currently about $44,322 per year, full time, in the US.

And if one is interested in addressing economic and social inequality in a comprehensive way, all the (progressive) solutions on the taxation side are trying to capture a horse after it has left the barn. The power that employers have now to pay rock-bottom wages to workers while paying themselves like kings means that they will likely have the means to make up for any tax increases. One solution is to insure that the labor market favors workers consistently, making jobs available to all, and using plenty of fiscal spending in times of slack private investment. But that simply works within the system, a system that is run, via our political and financial elites, by the incumbent powers of class and wealth, from which labor friendly policy is as likely to come as pennies from heaven.

Let's start with some easy issues first. How would currently high-paying professions be staffed if they were not paid differentially? Such work as financial engineering, dentistry, or medicine. Or CEO, lobbyist, sports star, political consultant, movie actor? The current system is, frankly, obscene in this regard. Would NBA teams not be able to field players if they did not paid them like kings? Probably, and one might get players who actually want to play, and they would be selected just as stringently, because the ancillary benefits of fame, status, and pleasure would remain, and the limited number of teams (and audiences) would remain likewise. More obscure fields like oil drilling, sales and marketing, dental hygienist, etc. might be more difficult to fill. But are they really paid that well? Typically not. It would probably just take some modest interest and training to attract people who otherwise might end up as farm workers or janitors, with less pleasant work conditions.

Similarly, the challenge and personal rewards of professions like medicine would remain and attract perhaps an even better class of trainees than they do now. Professions such as finance whose mind-numbing and pointless nature is now relieved only by their high pay might indeed contract, and frankly that would be a very good thing. So we would enter a world where students study what they are interested in, and enter professions that suit them, which select them on every basis of training and qualification as now, but without the lure of unusual monetary reward or penalty.

How about the low-wage work on which so much of the economy depends? Firstly, easily half of this work is completely useless. Unlivable wages allow many employers to hire far more people than needed, (fast food, retail; imagine being a walmart greeter), flood markets with low-margin franchises, and avoid efficiencies and mechanization. Labor shortages commonly spur efficiency gains. Secondly, a great deal of effort otherwise spent fighting against and dealing with unions might be saved by an equal pay regime. But in the end, paying people decently should come ahead of the consumer's ability to command the cheapest goods and services.

Entrepreneurialism is a somewhat more ticklish problem. How should we encourage business formation, innovation, family businesses, investment, and all the other energies of the free enterprise system if greed is no longer the central motivator? I think a general answer to that is to separate corporate and personal income on a stringent basis. If one wants to start a company that does great things, fine. One can grow it to globe-straddling size, but one can not pay oneself more than any other employee. That goes for bonuses, shares, etc.. all the remuneration that is now fair game would be strictly controlled, via the tax reporting system, and perhaps other enforcement, to one simple salary.

This relates to the problem of how investment would take place. Personal savings from such a system would probably be modest, and insufficient for the capital needs of the economy. People would generally be more dependent on (and willing to pay for) government programs to manage life-cycle savings, catastrophic contingencies, education, etc. I think one way to deal with the investment issue would be to allow special corporations (one might even call them "banks"!) and corporate entities like non-profits and educational institutions to have investment holding roles. Thus there would be a large ecosystem of investors and investments that do not significantly touch /affect personal income, but run large-scale investments in private enterprises due to the good judgement and personal values of the people involved. If the managers were unsuccessful, they might be demoted from their C-suites to street sweeping, but their personal income & sustenance would not be affected. One's social standing (and values) would be a much stronger aspect of motivation than greed, as would the personal satisfactions of the work one does. This would perhaps hearken back to the conditions in Antiquity, (occasionally, at least), when leading people and families competed to contribute to the state, not to leach from it, due to an intense sense of honor and reputation.

How about parenting? A fair system would pay for child care, whether done by parents or outside caregivers. So perhaps a parent could be paid through the first five years of a child's life if the parent decided to stay home, ideally at a full salary. This would make the decision to work or stay home shaped by personal preferences, such as career goals, rather than about finances. The same would go for care-giving to elderly parents and relatives, subject to some kind of certification that it is a full time occupation.

Perhaps the most difficult aspect of such a system is the impetus towards a black market, to under-the-table payments, gold-plated executive suites that pay in helicopter rides, escort services, etc. In our political system, with all the principles and deterrents against corruption, corruption remains rampant, indeed functionally legalized. Similar pressures would be inevitable in a tightly controlled equal pay system. Communist systems routinely elevated powerful people into great effective wealth, whatever their nominal salary. The best I could propose is again a strict separation between corporate and personal books, with transparency and strict regulation of what goes where. The current system of business tax deductibility, for example, requires extensive itemization and reporting, all to create an appalling drain on the public coffers, for the benefit of those need no such benefit. In the end, we organize society to limit some freedoms, (killing, fraud, theft), so that other and better freedoms may flourish. And perhaps the freedom to pauperize / feudalize your fellow citizens might not be as valuable as the freedom to have a decent and equitable life.

And how would this universal pay be set? It would be a broad economic policy exercise that fits closely with MMT (macro)economics. The tuning could be quite simple- if inflation threatened, pay would not be raised, while recession or deflation would be easily solved by raising the standard salary. Ultimately, its level and its value would be set by overall GDP and productivity, but the government, as the creator (and destroyer) of the currency, could easily make more or less of it and spend it in the form of salaries or other projects to fine-tune through any economic variation. Variations that, naturally, would be rare if not unheard of in this proposed society.

It is a thought experiment to imagine a system less besotted by greed, class, and injustice, more valuing of human e-qualities. One has to doubt its feasibility, but I believe it is a relevant ideal, or perhaps counter-ideal, for our time.

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