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Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen My Amazon Authors' page Twitter:@ jacolineloewen Linkedin: Jacoline Loewen Profile

September 2, 2011

Should employers be forced to publish everyone’s pay?

That The Economist, the pillar of Capitalism (or it used to be) even posts such a question is alarming. Even more sickening is that half the readers who took the poll thought this was a jolly good idea. It reveals a appalling lack of understanding about how markets are structured. I found it even more surprising that from the comments, it seemed that the young generation liked the idea of revealing who is better and getting the rewards for their hard work.
Weren’t they the generation where marks in schools were hidden, where no one came first, everyone's a winner and gets a trophy and everyone’s artwork was put on the wall? I guess these young people do not understand how things work in the real world where if the art work is not that great, the customer will not select it:
No customer, no revenue, no business to pay salaries. 
Fini.
 There may be an argument for requiring company owners to publish a list of who is paid what, so that if anyone is being discriminated against for any reason—not just sexism but other generic reasons such as race or religion, or maybe because of some individual vendetta—he or she can seek redress, or at least demand proper explanations as to why others are receiving more. Imposing such a rule on workplaces where pay varies widely is bound to cause ructions. It might cause more trouble than it is worth. Or maybe those ructions are necessary, to force those employers to be more rational in how they reward effort and talent.
Colin O’Neill from the heart of Socialist Capital of BC Canada writes:
The secrecy seems to be a form of short-term, rent-seeking behaviour; an inefficient game, where the employer incentives during wage negotiations is to exploit the asymmetrical information at the greater expense to the economy. A person's wage should reflect their productivity (their contribution; their value etc.): without transparency, the marginal cost of the worker won't equal the marginal benefit. Some workers are paid too much, some too little. A worker won't know where they are most productive (where an employer is willing to pay them more); therefore, factors of production (people) in the economy are not being used efficiently. 
Thank you, Trevor P. Harvey, who is older and wiser than Colin and probably remembers life before Socialism, and replied:
But Colin, what does this mean? "A person's wage should reflect their productivity (their contribution; their value etc.)" Who is to decide such relative values? Imagine comparison of Mozart, Pele, Shakespeare, Isaac Newton and Marie Curie. All had either employers or patrons. All were productive, but not one directly compares to another. Surely the only real arbiter of what value the world puts on us is the market. As R. L. Stevenson so rightly remarked, "Every man lives by selling something." Or at least, they did before the welfare state made fecund idleness a good little earner.
My favourite comment was from Japan, by Shintaro Tominaga
Socialists are all over the world.
But here is the real secret that young Colin does not get: employees in privately owned companies do not reveal their true salary to their co-workers, nor to peers working at a competitive business, not even at an industry cocktail party to strangers. 
Why not?
Privately owned business is very different from Public employees who get their salaries paid for by tax revenues. Salary scales are not simple and Government regulations mess up the free market and suck up time that should be spent on keeping a business strong. 
In Private Equity, I am observing how Canadian business owners are finding out it is not so hard to do business in other countries with more attractive environments for business owners.
 So, what do you think? Ought employers to be made to reveal everyone’s pay? 

1 comment:

Anonymous said...

There is a war on about how much government is good. Check out Krugman going on about how great government is in Germany - he forgets Germany did not do a stimulus like he did. http://krugman.blogs.nytimes.com/2011/09/02/the-conservative-hot-tub-time-machine/?smid=tw-NytimesKrugman&seid=auto