Sunday, 19 September 2010

How much a footballer - or a cleaner - is paid is none of the Government's business whatever Polly Toynbee and the BBC might say.


In recent weeks I’ve written about the nonsense that is the labour theory of value including this observation:

In the final analysis something is worth what it’s worth – the value is determined by consumption not by production.

And, in order to demonstrate how allowing a guild system to dominate, I have observed that people (in the UK, at least, but probably everywhere else too) become doctors because it’s a very well-paid job. I know there are people who talk of their altruistic motives in donning the white coat – but would they do it without being in the top 1% of earners?

The BBC – in their leftie manner – has been asking about the matter of pay (and in the round levels of taxation). On the radio we got the delightful Polly – millionairess, ex-public schoolgirl, villa-owning champion of the poor and downtrodden. I note that she has not – in the manner of Dave Nellist – given away all her earnings so as to live on a ‘worker’s wage’. But that’s most socialists for you – do as I say not as I do.

I am however fascinated by the manner in which the debate about pay is couched. There are – it appears – three primary populist measures: the pay of the prime minister; how much premiership football players get in wages; and bankers’ bonuses. All other considerations – including the sensible and proper analysis of income levels and their impact on society – have to be seen through the prism of these measures.

Thus the wages of a local council chief executive are compared to the PM’s pay – not to a more fair comparison of the heads of the civil service (all of whom earn more than the prime minister). The proper comparison with the PM is what a council leader is paid not what the chief executive is paid – and here, whatever we might think about the remuneration of councillors, the PM comes out pretty favourably.

At the same time we have to go through the ritual about footballers – how their pay is ‘obscene’, how it is ‘destroying the game’ and often how the government should intervene. Again, we fail to ask whether the world-wide popularity of English football is the real reason for high wages. And why we should, in fact, welcome the fact that most of the cash we pay to watch, listen to and read about football ends up in the bank accounts of players (and through that in the coffers of the taxman).

The BBC reports were added to by an egregious poll conducted by ComRes – nothing wrong with the manner of the poll’s conduct or the professionalism of that company – but asking the public – without context – how much they think different folk should be paid is both economically illiterates and monumentally immoral. How much you or I – or rich folk like David Beckham or Tony Benn for that matter – earn should not be a matter that is the subject of social control. But heaven knows about the public’s value system anyhow!

The bosses of Britain's top 100 companies should be paid about £118,000 a year, a BBC survey suggests. Those questioned also put the pay of Premier League footballers and financial bond traders at £365,000 and £58,000 respectively.

And when the poll reports that lower paid folk should be paid more this is done without the obvious value statement – how happy will you, dear respondent, be to pay higher taxes, higher prices and have less choice? Not happy – well shut up saying what other folk should be earning then.

In the end we’re paid what we’re worth – or, in the case of doctors, teachers, bankers and lawyers, what we can screw from a market that the stupid government has given us control over. Yet the terms of the debate are conducted on the assumption that there is some morally justified public policy intervention in levels of pay – and especially pay of senior and successful people. There isn't.



Angry Teen said...

I wrote about this back when the World Cup was on:

"Tap water is worth a lot less than diamonds on the free market. But imagine if we priced consumer goods on the free market according to moral worth. Tap water needs to cost £1,000 a litre to give water providers the morally correct reward for their efforts, which help keep millions alive. Meanwhile, diamond sellers should be forced to charge as little as possible for their products, since they are not as important as water. Those of you with a trace of common sense will see that, after all, it is better to have tap water cost a fraction of a penny per litre, and diamonds to cost up to several thousand pounds, because in an economy, the consumer is the one who must be served, not the producer.

If we were to decide between all the teachers in Britain and all the footballers in Britain, we would choose to pay all the teachers more. However, the marginal utility of each individual teacher is much lower than the marginal utility of each individual footballer. When a teacher retires (with an obscenely high pension), quits their job (fat chance!) or gets fired (fat chance!), they are easy to replace. There is no shortage of people who want to become a teacher and have all the necessary skills (and with the good salary and long holidays, perhaps it is the teachers who are really the overpaid ones?). However, there are very few people in England who can score as well as Jermain Defoe or keep goal as well as Robert Green (yes, yes, I know), making them much more difficult to replace, and therefore much more valuable."

Anonymous said...

What I am missing in this conversation is some kind of economic, social or moral framework on the basis of which you base your arguments.

I can accept the argument about shortages and I agree that whatever is seen as 'obscene' very much depends on what you compare it with.

It still does not make clear why there is so much difference between real pay, and desired pay - and why the difference between the highest and lowest in the salary chain is as big as it is. How did this happen?

I have tried to come up with a framework, please do have a look - you can download it and then fill in the scores in Excel. It's an interesting exercise and I welcome your comments.