A Philosopher's Blog

Minimum Wage IV: The Value of Work

Posted in Business, Ethics, Law, Philosophy by Michael LaBossiere on August 21, 2013
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Some folks labor for minimum wage (or less) while a very few receive millions per year in compensation for their work. Many people are somewhere in between. However much a person makes, there is still the question of whether she is earning what she deserves or not.

This question falls, obviously enough, within the realm of moral philosophy and, more specifically, the subset of moral philosophy that is economics. After all, this is a matter of value and a matter of what a person should be paid.

On the face of it, the easiest and seemingly most sensible approach would be to answer the question by determining what value the person contributes and set that as the compensation the person deserves. To use a simple example, to determine the value added by a Big Burger employee to a Big Burger would involve subtracting out all the other contributions to the value of the burger, ranging from advertising costs to raw material costs. Naturally, the cost of managing the person would also be subtracted out. Since Big Burger employees are paid hourly wages and work with more than just burgers, the deserved wage would involve some estimations and calculations involving the average productivity of the worker. Other situations (such as those of salaried workers or self-employed people) would require appropriate modifications, but the basic idea would remain the same in that a person would presumably deserve to earn compensation based on the value she adds.

This would certainly seem to be a fair approach. If a person is paid more than the value of his work, then he would seem to be engaged in theft. If a person is paid less than the value of his work, then he would seem to be the victim of theft. Naturally, there can be obvious exceptions. For example, a person might help out a friend or charity by doing work at a rate far lower than she actually deserves without it being theft. As another example, a person might decide to help someone out by paying him more than his work is actually worth. This would be charity rather than theft.

On the idea that a person should earn what she deserves, then the idea of minimum wage would seem to not apply in a meaningful way. After all, the minimum wage and the maximum wage would be the same in this case, namely the value of the person’s contribution. Thus, perhaps the law should be that people must be paid what their work is worth. In some cases, a fair wage would be less than the current minimum wage. But, in most cases it would certainly be higher.

An obvious problem with this is the difficulty of determining the value of a person’s work. One aspect of the problem is practical, namely sorting out all the costs involved and determining what the person in fact contributes in regards to value. This is mainly an accounting problem, presumably solvable with a spread sheet. The second aspect of the problem is were value theory really enters the picture, namely sorting out the matter of assessing worth. That is, determining what should go into those cells on the spreadsheet. For example, what value does a CEO or university president actually contribute via their leadership? As another example, what is the real value an artist adds to the paint and canvas she is selling for $45,000? This area is, to say the least, a bit fuzzy. There is also the fact that people would tend to overvalue the value of their own work and generally undervalue the work being done for them.

The minimum wage could, then, be seen as a rather weak guard against work being grotesquely undervalued. By setting a minimum, this means that people will (in general) at least get some of the value of their work. However, it certainly leaves considerable room for greatly underpaying workers relative to what their work is actually worth.

The stock counter is that such matters get sorted out by “market forces.” That is, people whose work is more valuable can command better wages while people whose work is less valuable will command lower wages.

The obvious reply to this counter is that the alleged market forces tend to result in most people being underpaid and some people being compensated far beyond their actual contributions, even accepting the fuzziness of value. In fact, the underpaying of most is what is needed for the few to have such generous compensation. After all, if people were paid based on the value of their work, then there would be no fair way to profit off this work. For example, if Bob contributes $50 of value per hour to my widgets, I would need to steal from Bob to make a profit off his labor.  As another example, if a CEO contributes $100,000 in value to the company, but is compensated with $10 million, then he is stealing the value generated by others.

It might be said that this is all fair because people agree to this system of value. However, this does not seem to be the case: people seem to agree to it in the same way that people agree to a dictatorship: they just go along because the people on the top and those who support them have the power to hurt them.

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  1. T. J. Babson said, on August 21, 2013 at 9:19 am

    “If a person is paid more than the value of his work, then he would seem to be engaged in theft. If a person is paid less than the value of his work, then he would seem to be the victim of theft.”

    No way, Mike. If you pay more for a can of peas at Kroger than you do at Walmart this does not mean that Kroger engaged in theft.

    Think about it, Mike. Why would anyone create a business and hire employees if the employees did not create a profit for the business owner? This is not immoral. The employer provides a job, and the employee creates profit for his employer. You are basically arguing that the profit is theft.

    • Michael LaBossiere said, on August 21, 2013 at 2:59 pm

      Paying less for a can of peas at Walmart would generally be possible because Walmart has lower costs, perhaps by paying their workers less per hour than they do at Krogers. So, the cost is higher without the customer being robbed at Kroger-assuming it is being sold for what it is worth.

      I have no objection, as I have stated, with an employer earning a huge stack of cash. The problem with profit is that it is, by definition, income over and above all expenses. This presumably includes the expense of compensating the owner. So profit would generally mean that someone is getting ripped off.

      Now, if you want to define profit in terms of the fair compensation of the employer based on his/her contributions, then profit would not be theft. But, it would not be profit in the usual sense.

      Naturally, I have written about situations in which people value things differently. So, for example, if someone insists on paying me $100 for a signed copy of my $7 book and she values it that much, I am not stealing from her even though I’d think the book would be worth about $3.50 after I signed it. This does leave an out in which everyone is satisfied with the situation and there is no coercion.

      Naturally, I would not say that a person’s perception of value must be accurate. If I think my book is worth a million dollar advance from a publisher, then I am rather clearly in error. The interesting challenge is working out an account of value that can account for such complexities and complications.

      The gist of my view is that people should receive compensation that is properly proportional to their contributions of value. When the top folks and the folks at Fox talk about compensating top talent, I agree with the principle that people should get what their work is worth. However, I hold this principle consistently-it is not just for the top money makers, but for everyone. Yes, this does entail that at least some folks on minimum wage are overpaid.

      • WTP said, on August 21, 2013 at 6:48 pm

        So profit would generally mean that someone is getting ripped off.
        Define “generally mean”. More equivocating.

        This presumably includes the expense of compensating the owner
        Again, Mike knows nothing about business. The profit is the compensation of the owner. If the owner (or stockholders) hires someone, say an executive officer…perhaps even a Chief Executive Officer, to run the company for him, limiting his own effort to careful oversight, the profit is what the owner is paid for putting his capital at risk. Do you even know what capital is, Mike?

        I agree with the principle that people should get what their work is worth. And Mike glosses over how this decision is made. What God-like creature will come down from the heavens to decide what Mike thinks is “properly proportional to their contribution”?

        So going back to:
        So, for example, if someone insists on paying me $100 for a signed copy of my $7 book and she values it that much, I am not stealing from her even though I’d think the book would be worth about $3.50 after I signed it. This does leave an out in which everyone is satisfied with the situation and there is no coercion.

        Notice that the free market is fine, as long as it works for Mike.

        Who Mike, who is being coerced to buying a product from a specific supplier or coerced to work for a specific entity? The taxpayer Mike, that’s who.

      • T. J. Babson said, on August 21, 2013 at 7:16 pm

        Mike, let’s say you are running a lemonade stand. You buy lemons, sugar, cups, etc. and pay $20. At the end of the day your lemonade is gone and you have $25 in your cigar box. You made a $5 profit. Maybe the next day it rains and you suffer a $10 loss. Maybe during a really busy week you hire another kid, pay her $3 per hour, and at the end of the week your business turns a $12 profit and the kid you payed earned $18.

        Can you translate these outcomes into your vocabulary? Why do you feel the $5 you earned is somehow immoral?

        • Michael LaBossiere said, on August 22, 2013 at 12:18 pm

          Ah, you are using “profit” to mean “the money I made over my raw material costs.” In this case, I earned the $5 by my labor-converting the sugar, water and lemons into lemonade and providing them to my customers. This seems morally okay.

          Now, if I hire a kid and provide the raw materials, then I’d have to sort out how much a contributed to the process in order to determine how much I actually earned. If I spend $20 on materials and the kid does all the work, then I would deserve $20 back for the material costs, plus whatever the value is for what I have provided. Did I train the kid? Did I build the stand? Did I handle the advertising? If so, I deserve the value of those contributions. If my contributions are worth $12, then I earned the $12. If the kid’s contributions are worth $18, then the kid earned it. But if the kid contributed $30 in value and I contributed on the raw materials and I pay him or her $18, then I am ripping him off.

          Again, my view is simply that people should get what they actually earned.

          As before, I do openly acknowledge the obvious: value in this case has strong subjective elements. So, if the kid is totally stoked about his $18 and knows that I am making $12 and is really okay with it, then I would be hard pressed to say I am stealing from him. After all, there is no coercion or deceit at all. Now, if the kid takes the $18 because he doesn’t have $20 to set up his own stand and because I am known for busting my competition with unfair practices, then we have another situation.

          As I have said, I am fine with people earning huge stacks of cash, provided that they actually earn those fat stacks. My grievance is with people just taking money away from others. This is, of course, the same point made by folks who get up in arms about taxing the rich-the idea is that someone is taking the money they have earned to give to someone else.

          • Douglas Moore said, on August 22, 2013 at 4:55 pm

            Can’t I leave my job and go somewhere where I’m paid a fair wage? Or is every business involved in the conspiracy?

            • Michael LaBossiere said, on August 23, 2013 at 6:46 am

              If you can afford to move and can find such a job. It is not a conspiracy, but businesses will generally pay as little as possible proportional to the status of the employee. So, as long as you have higher status and the resources to move, this is an option.

              You, for example, joined the Army after trying to find a non-crappy job.

            • Douglas Moore said, on August 23, 2013 at 11:15 am

              That is true, I did. My delivery job provided enough cash to make my car payment, buy gas and buy food. Two female drivers crashed into me in two months. It wasn’t worth it. Speaking of which, jobs reliant on tips seem to mess up the system. People must rely on the varying goodwill of others, while not making the minimum wage.

            • Douglas Moore said, on August 23, 2013 at 11:21 am

              I think the Medieval Apprentice system was the greatest system ever made for developing workers with real skills. Many people whom complain about their low wages, are jobless or on welfare have no job skills whatsoever. I myself would love to be involved in an apprentice system, in which a master as his vocation teaches me everything he knows for a number of years.

            • Michael LaBossiere said, on August 23, 2013 at 1:08 pm

              If someone lacks skills, then they cannot expect much in the way of employment (unless they have connections, of course). Unfortunately, people who have skills also face unemployment these days. There are plenty of educated and skilled people who are unemployed or underemployed. China is experiencing a surge in this as well: the are graduating more college students than they are creating jobs for college educated people.

              Today, high schools and colleges provide the education foundation-then people learn on the job. There are still some apprentice like roles, usually in the arts or very specialized (often all but obsolete) crafts.

  2. WTP said, on August 21, 2013 at 9:36 am

    You are basically arguing that profit is theft

    You’re just beginning to understand how far left Mike is? Stick with him on this. Don’t let him weasle the meanings of words and such.

    One thing I wanted to bring up in the other thread (had no stomach to read this one, but SSDD) is that Mike is completely oblivious to the concept of business equity. Not just to take advantage of opportunities to expand but also to have sufficient reserves to weather the hard times. Actually, I think the opportunity to expand the business is abhorrent to Mike. He sees it as taking away opportunities from others.

  3. T. J. Babson said, on August 21, 2013 at 5:08 pm

    Democrats at work (on topic).

    The campaign to end unpaid internships has reached the White House.

    The Fair Pay Campaign, a private group, is calling on President Obama and aides to pay White House interns, hoping the move will inspire other employers.

    “We have a minimum wage law in this country, and just because you call someone an intern doesn’t mean you get out of it,” says Mikey Franklin of the Fair Pay Campaign, reports CNNMoney.

    Interns across the country have made complains and even filed lawsuits over the lack-of-pay issue.

    “According to the White House website, its internships are unpaid, housing isn’t provided, and interns should expect to work ‘at least Monday-Friday, 9 am-6 pm.’

    “The campaign’s focus has turned to President Obama as he has been stumping for raising the minimum wage all summer.”


    • Michael LaBossiere said, on August 21, 2013 at 5:32 pm

      I’ve written on internships before. My overall view: interns who are doing work should be paid for their work. This can be offset somewhat by other value provided (such as training), but interns are often just exploited as free labor.

      So, those interns at the White House should be fairly compensated.

  4. Douglas Moore said, on August 21, 2013 at 6:06 pm

    Fact: This system of “injustice worked better than Marx’

    • WTP said, on August 21, 2013 at 6:35 pm

      And always will, in the aggregate. But why is that, Magus?

  5. Kyle said, on August 21, 2013 at 8:06 pm

    What if the product the worker participated in producing doesn’t sell, and the firm doesn’t make a profit, but a loss? Should the worker not be paid? Should he have his wages forcibly taken back? If his work has been revealed to be of negative value, perhaps paying him the value of his work means he should have less money than before he provided his labor.

    • Michael LaBossiere said, on August 22, 2013 at 12:26 pm

      I was in that situation myself-a gaming company owed me a few thousand dollars for past work and they tanked. I never got the money, but did get to pick over some of their leftover stock.

      My thoughts on this are as follows:
      1. If the worker actively contributed to the failure (that is, the worker herself generated negative value) then he would certainly not deserve to be paid for this sort of thing. This could be a case of a worker who sabotages the work, steals products, and so on.
      2. If the worker is contributing positive value, but the burden of failure rests on the employer (bad management decisions and so on), then the worker does deserve her pay. After all, she has contributed despite the failure of leadership.

      Thus, it would be a matter of where the blame lies.

      In my case, I was in situation #2: my work did well but the company fell apart due to numerous poor decisions.

  6. WTP said, on August 25, 2013 at 10:54 pm

    Heh, reminded myself of this. Magus, perhaps you’ve seen this one in your literary travels?…
    Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive… those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience. – C. S. Lewis

    • WTP said, on August 25, 2013 at 10:57 pm

      dammit…Full point lost in the stupid ellipsis

      “Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. This very kindness stings with intolerable insult. To be “cured” against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.”

      • Douglas Moore said, on August 26, 2013 at 4:50 am

        Yes, I am quite familiar. We are there. We are less free then our forefathers, and less happy. In general, we are dumber, weaker, and miserable. What’s not to like about our new systems?

  7. WTP said, on August 28, 2013 at 11:38 pm

    Now here’s something to be concerned about. Why if this catches on there’s no telling what the consequences will be for society. Turn on the Summon Mike Light…

  8. Douglas Moore said, on September 5, 2013 at 7:40 pm

    Interesting fact: Germany has no minimum wage law. The law states that German citizens cannot be paid an “immoral wage”, which is generally considered to be lower than 75% of the average wage for a job. I can attest that Germans do quite well compared to Americans.

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