I continue to think about the arguments around income inequality. I mentioned in earlier posts that I think the debate is distorted by mixing celebrity income with career income. Some of the highest incomes are a result of celebrity rather than a career choice.
Celebrity is recognition and popularity based on a name, a face, a person. The individual is in high demand for whatever reason and that drives up the income value either from competition for access or the prestige of claiming that person as part of an organization. In effect, the celebrity managed to turn his person into a marketable brand that has has value independent of what the person actually does. The celebrity is paid for the brand’s inherently limited availability relative to the larger demand for access. I guess it could be turned into a supply and demand argument, but one based on access to a personality or brand rather than the actual services.
Some of the highest paid celebrities may be pure brand where essentially all they need to do is to show up or to provide some endorsement. I think most celebrities earn their celebrities by being particularly good their jobs. By this I mean there are plenty of examples of others who are doing the same kind of work not as well. Demonstrated merit does not require the absence of peers. It only requires that a recognition that many others whose abilities are not as advanced or competitive.
These meritorious celebrities set themselves apart from their peers by their attainment of popularity for whatever reason. This highly inflates their income to place them in the examples of high-end extremes. To clarify, I’m focusing on business positions of upper management or director level positions rather than popular entertainment or sports. At these high level positions in a company there is a premium for name recognition or celebrity on top of demonstrated merit. However unfair, there is an impression that the mere presence of a particular personality brings some assurance of success.
I don’t think there is any way to distinguish the value of celebrity from merit in a compensation package. Celebrity is inherently subjective and the demand for high competence exceeds supply.
But in our discussions of income inequality, I rarely encounter an appeal that celebrity (or obscurity) are essentially outside of influence by policy. Some people will be more popular than others, some may never be popular. Outside of totalitarianism we have little control over influencing a populations preference for individual people.
I recognize the concerns about income inequality being a destabilizing factor for a society, no matter what the explanation for that inequality. That is not the concern I want to talk about now.
I want to talk about anonymous income inequality. A certain type of work competently done by any otherwise obscure individual is worth more, and potentially lots more than another type of work performed with comparable competence in that field.
Growing income inequality in faceless jobs are in part of consequence of the growing globalization of products. This is an indirect relationships of productivity. In particular, productivity measured as how people benefit from a time-unit of labor. Someone who is instrumental in rolling out a globally popular product or service is going to find his effort enjoyed by a very large population each of whom are willing to pay (in some way) for that product. Even if that incremental value paid by each consumer is small, the size of the market has a huge multiplying effect on the value of the labor that went into making the service possible.
This is not a ideal world where that money would find its way back to the original innovator. Instead the prospect of similar future returns increases the value of current labor working on what is hoped to become the next big thing to capture the global market.
Working in technology, massive services (like social media), or more general merchandise is a type of work that essentially isolates the worker from the customer. Rarely does the end customer or worker ever meet or otherwise recognize each other. In my attempt to eliminate the influence of celebrity, I’d disqualify those who do recognize each other from the pool I am discussing.
This type of work has an appeal to a certain portion of the population who are comfortable doing their work anonymously or whose need for personal service is satisfied by the formal relationships with peers and managers.
There is portion of the population who prefer to provide services at a personal level where they individually deliver a product or service directly to a client who in turn provides compensation for a job well done. For this portion of the population there is a need or at least a desire for receiving an personal expression of appreciation or fellowship on top of the compensation.
By definition, these very attractive jobs have very low productive. One’s labor hours is devoted to one client at a time. No matter how appreciative the client, there is a limit to what the client will consider affordable to compensate for that labor.
Also inherent to these jobs is the almost near impossibility of productivity. Productivity enables someone to server more clients but that means having less opportunity to establish a valued relationship with any client. To say these workers resist productivity unfairly implies they are being reactionary to change. Their resistance is to protect what they value most about the job: the ability to relate with the client.
Many times such workers are drawn to volunteer work with charitable organization. Their entire compensation is what they get from the relationship with the client (or cause).
Education and health care are examples of compensated work where many of the workers are drawn primarily for the opportunity to work with individual clients and deliver services that improve the client’s well being in one way or another.
These are also professions that are highly resistant to productivity that can lower costs or increase compensations.
There are many innovations in these areas that promise enhanced productivity to levels closer to the alternative faceless industries. Getting them into practice is very difficult.
On one hand, incremental improvements involves unattractive incremental changes in compensation. Often the loss of time available to spend on individual clients is not sufficiently compensated by the increase in pay. There is a truth in Mastercard’s advertising campaign describing priceless moments. There is a priceless quality of delivering services directly to the beneficiary one person at a time. I’m not sure any monetary reward can really replace it.
I imagine there are many people whose motivation to become a licensed physician was primarily for the opportunity of fellowship with a patient whose health was improved by his efforts. I have sympathy when he finds himself with a job of very narrow responsibilities that allows him to spend a few minutes (if even that much) face-to-face with any patient. It isn’t happening just with relatively higher paid doctors, but throughout all of the health care jobs.
The need to control overall costs of health care demands productivity but the attraction of entering the field demands the opposite.
The same dynamic is happening in childhood education with the need for higher productivity in terms of broad achievement levels in standardized testing. Educators are drawn to the field by the opportunity to spend time with individual students to help them reach their individual potential. We instead ask them to redirect their efforts away from the individual student in favor of precise material that will show up on exams. The quality and nature of the profession is changing in ways the lose the appeal of the profession in the first place.
Turning the two examples around, I think a similar case can be made in terms of the value received by the clients, the beneficiaries of health care or educational services. Both benefit in part from the interpersonal caring relationship where a person of expertise acknowledges the progress of the client. In an earlier post, I described my idea that one motivation of a student is to receive a personal acknowledgement by the teacher that the student has reached a level that qualifies him to be a peer with the teacher (at least in terms of the subject just taught). I imagine a similar benefit of the curative powers of hearing an acknowledgement of a skilled and experienced professional that he understands what the patient is going through and has high confidence that thing will work out ok. In both cases, these benefits require substantial amounts of clock time where the client and provider have exclusive access to each other: the definition of low productivity.
The goal of valuing liberty or pursuit of happiness is in part defined by the liberty to pursue a line of work that is most fitting for a person’s individual desires. That liberty will lead people to choose between jobs that coincidentally have different levels of potential productivity.
In an economy where money is exchanged for specific services or products, the income potential of any person is proportional the market size his labor can reach. Such economies have benefits in terms of improving standard of living for all. But they have the downside of disconnecting the income from the hourly effort required.
We can value highly the jobs that involve closer relationships to individual clients. But the money available for compensation is limited by what these clients can afford to exchange for the services they receive.
The rapid growth in income inequality over the past couple decades (to the extent it is real) comes in the high-productivity industries that grew to reach global markets. The helpful industries at the other end are holding steady. Perhaps now that the global markets have been reached, that products and services can reach the entire planet, the growth in disparity will slow and become a new normal.
These thoughts don’t offer any hope for any answer or solution. I just offer a note of caution that pushing higher productivity in some job markets can greatly decrease the appeal of the professions’ opportunities for interpersonal relationships with the clients.