Tuesday, May 10, 2011

Comparing Salaries

Here is an interesting post by Dean Baker on his Beat the Press blog:
In the wake of their successful assault on Osama Bin Laden's hideout, ABC News did a short feature on the Navy Seals. The report tells us that the people who hold this highly demanding and dangerous get paid about $54,000 a yeat. It then adds that:

"The base salary level [of Navy Seals] is comparable to the average annual salary for teachers in the U.S., which was $55,350 for the 2009-2010 school year, according to the Digest of Education Statistics.'

That is one possible comparison. There are other possible reference points. For example, the CEOs of Goldman Sachs and J.P. Morgan both pocket around $20 million a year. This means that they make almost twice as much in a day as a Navy Seal earns in a year. Not many bank heads have to worry about getting shot in the line of duty.

Of course some Wall Street types do even better. Hedge fund manager John Paulson reportedly pocketed $5 billion last year. If we assume a 3000 hour work year (presumably he had to put in some overtime), Paulson had to work about 2 minutes to earn as much as a Navy Seal does in a year.
Read the original post to be the embedded links.

Most people would think that John Paulson must be doing some wondrous good to earn that big salary. From what I can tell his "job" is to maneuver dollars from Person X's pocket to Person Y's pocket. He builds no factories. He saves no lives. He doesn't educate anybody (teachers). And he doesn't make America safer (Navy seals). But he gets the biggest take home pay. Ah... the "wonders" of capitalism!

3 comments:

thomas said...

RY;

I have been considering pay scale on a personal basis for some time now, and I look at comparisons like this and wonder about our capitalism (I know it is perfect, and that I shouldn't think about it). How does one decide the rate of pay that is fair for any certain job?

One area of concern is how much athletes, or anyone in the business of entertainment, gets paid. This concerns me because it seems that the cost of watching a game has gotten to the point that only a person in a higher wage bracket can afford to buy tickets to games or concerts (concerts are cheaper much of the time). Even college games are very expensive. It comes down to a class distinction because only the wealthy will have access to something that should be simple entertainment for the masses to enjoy on a first come first serve bases or at least the cheap seats should be affordable for anyone of us poor peons. Why does an athlete need to make over a million per year? In comparison to a Navy Seal or a teacher? How many teachers have students that "made it" and often thank that very teacher in public? How many of these athletes have "saved" a child from failure? How many of these athletes, or bankers for that matter, could face a room full of kids and teach them something that years later they would still think about and even praise the teacher for imparting it to them? We know that they wouldn't even get on a plane or helicopter to go do what those Seals did, but at the same time, most of these high payed pansies couldn't think of walking into a classroom to teach for a week or year or thirty years..

How do we decide that certain jobs should be paid ludicrous wages? I mean ludicrous. No CEO is worth so much money or an investment banker or a football player.. So much for believing that the market is infallible magic.. How could such an infallible god cause so much hardship and imbalance on so many people? I just can't believe in this god or magic that these people seem to worship, but I am not on the high pay-scales that they are.. It's easy to preach about a religion when you are going home to a mansion and flying on a private jet then helicopter to your yacht.

RYviewpoint said...

Thomas:

We live in "market" economies so most wages are set by supply & demand not by "fairness". The great divide between rich and poor was knocked down by the Great Depression and WWII. The government imposed high taxes on the rich and it kept the US a middle class country up until the great revolt of the rich when bonds went sour during the stagflation of the 1970s. The rich got politicized and Ronald Reagan and the 1980s were the result. He promised the rich that their "efforts" would be rewarded and he told everybody else to wait because the goodies would "trickle down" if you let the rich be free to become fabulously wealthy. So the 1980s because famous for excess which in my mind was epitomized by the TV show Lifestyles of the Rich and Famous.

The bottom 90% were sold a fantasy. Let the rich prosper and you too will prosper. But most rich people are rich because they love the money & power and don't throw it around. (People confuse wastrels with rich people. The really rich are tight-fisted misers, think Warren Buffett.)

Since "fairness" won't set salaries, you need to use either moral suasion, religious edict, or government policies to correct the lopsided income & wealth problem. Ideally moral suasion is the tool to use because it is voluntary. But it requires a cohesive society in which everybody feels a part of it and holds a role in it. But US society is far too fractured for that. Next best is religious edict, but again that requires a religiously unified country and the US is not such a society. So you are left with government to play the role.

But the poisonous politics in the US tells you that isn't going to be effective any time soon. You have a major party that really, really believes that money & wealth are signs of moral superiority (in fact some Christian sects believe that money is a sign of God's favour... they have obviously never read the book of Job in the Bible).

In short, there is no easy answer to the question of how you can get back a "middle class" America. It would be a much healthier and happier country if the worship of money died out and the economy was reshaped to have more middle class salaries. But I honestly have no idea of how to achieve it except through moral suasion, a religious "awakening", or a enpowered government with a social agenda to "level the playing field" for the next generation.

RYviewpoint said...

Thomas:

I gave you 3 ways that salaries between the rich and the bottom 90% might be brought back in line. I pointed out that a TV show marked the era of interest in the rich and the start of the rise in the discrepancy between incomes at the top and for the bottom 90%.

I should have connected the dots. I failed to point out that besides moral suasion, religious "awakening", and government, there is a fourth way to bring salaries in line. It is a variant of moral suasion. Instead of "preaching" you humiliate the rich. You use media -- like TV shows and movies -- to paint the rich as clueless greedy and anti-social people who are so in love with themselves they forget that they live in a broader society. You make them uncomfortable by making fun of them. You convince them that if they want to "fit in" they need to change their ways and join the rest of us in a one-big-happy-family. This is like moral suasion, but it doesn't have to be preachy. It can simply make them laughingstocks until they are so uncomfortable they want to lower their profile.

I don't see any signs that Hollywood has caught on that it needs to play a new role. But like keeping Tinkerbell alive, we all must believe and believe and believe to make it happen. Oh... and since we do live in a "market" economy, stop paying for films about rich people as noble or good and start buying tickets for films about "the little guy has a heart of gold" and "ordinary people struggle against the greedy rich and make a better world for themselves". Themes like that will start planting the idea that we should stop worshiping the rich and start ridiculing them.