Worth of a Worker

I read an article concerning the morality behind paying employees. There is a constant argument about what minimum wage should be. Especially in areas such as southern Utah, where the cost of living has gone up drastically, but the minimum wage has not. Yet would it really be beneficial to raise the minimum wage? I say no, because that will just result in increasing the rate of inflation. I agree with the "Angry Professor" that the wages will tend to increase in this area because as he stated, "everyone will be paid the same as the last one hired." If they are not, then they will cease working there. When looking at the construction industry here in southern Utah, one can demand higher pay because of the amount of work that must be done. This results in construction workers income increasing. Now we get to the question of this being morally correct or not. It is common sense to know that just because the wages are going up that the quality of worker is not automatically going up at the same pace. Yet if the employers do not pay equal wages to their employees they are ridiculed for not being a just boss. In my opinion, the boss should pay the worker what they are worth. Forget comparing what each worker is making and then averaging out an equal wage. When focusing on each employee and paying them what they are worth, you can help the employee become more of an asset by helping them understand where they can improve in order to receive a higher wage. This should benefit both parties. Is this morally correct? I do believe so; however, it is not for those of you that cry when you do not get to take the easy way out.


Dan said...

I also agree that employees should be paid what they are worth. However, if this is the case I still think there will be resentment towards management. The reason for this is because what an employee thinks they are worth, and what they really are can be two different things. At my current job people bitch and moan all the time about their salary, but I think that if people are really that underpaid, then maybe they should quit and find a new job that pays them what they think they are worth. I am sure that would not be to hard with the skills that most of these complainers have.

pramahaphil said...

I've read post like this many times in your blog, and I'll say the same thing I've said before. Paying workers only what their worth makes great sense according to Adam Smith, but it does not win elections.

I'm not sure that the arguement that increasing minimum wages will increase currrent inflation holds much water. I do agree that the original enactment of minimum wages laws has alot to do with the inflation over the past 50 -60 years. But, in the short run, currently we are in a period of inflation caused by other factors. Therefore wages will have to increase to keep the lower tier of workers (who may have become quite proficient) making a living decent enough to keep them working in those fields. High turnover doesn't make good economic sense either.

While businesses shouldn't be forced to pay too high of wages, people do need to be paid enough to provide for basic necessities. Just because something makes good economic sense doesn't make it right. Would wages go up without government intervention? Most likely yes, but government has already got their hand in that cookie jar and t'ain't likely they will pull their hand out. For some business owners the raise in min. wage is the only thing that will get them to give their workers a raise anyhow.

emily said...

I'm not sure if i totally understand, but hopefully this sounds right. I'm not sure how you can judge the worth of a worker. Yes there are many good workers out there, but what tells you how much to pay them. This probably falls into the ethical and moral area, but the hardest worker could be unliked by the person deciding the worth. And the person who is lazy and just sits around, but is liked by the boss, gets payed more, how does this work.

And then the whole contruction part of the post, I heard a presentation in a recent class that said that contruction owners are very unethical because of the whole being paid in cash.

I hope this made sense.

Logan said...

Connor, I couldn't agree with you more! Employees should be paid what they are worth, not a penny more or a penny less! What happens to an employee's incentives to excel when he or she knows that according to government regulation their employers can't pay them less than a certain amount? In the long-run minimum wage increases only cause more unemployment.

Dr. Tufte said...

-1 on Connor's post for a generic link, rather than one to the article of interest.

What Connor is advocating is paying workers their marginal product (or more correctly, their marginal revenue product). This is analogous to piece-work.

Emily has added in the problem of rent-seeking. In economics, rents are abnormal payments that one receives for goods and services, and the bootlicker everyone knows is an example of this.

While very efficient, the difficulty with doing this in practice is observing workers marginal product, Logan. Which would you rather do, spend a lot of time and money observing workers to figure out their marginal product, or pay them something different and use the money in a different way?

I think pramahaphil has some good, practical points.