Why do investment bankers make so much money?
Investment bankers get large salaries and huge annual bonuses, while public school teachers and social workers make (comparatively) very little.
Why is it that some jobs make so much more money than others and how are large pay differences justified?
While teachers and social workers contribute enormously to the well-being of society, that doesn’t necessarily equate to a great deal of pay. So what constitutes fair pay? Should it be a reflection of hard work and effort? Should it be decided by the worker’s contribution to their communities? Will working longer hours and doing more difficult tasks equate to better pay? 🤔
I’ve observed more and more people being paid exorbitant amounts of money for jobs that don’t necessarily benefit anyone to any great degree.
Earlier this year for a book club meeting, we focused on Utopia For Realists by Rutger Bregman. It was a fascinating read exploring concepts such as shorter work weeks, universal basic income and open borders.
Bregman also discussed an issue that has always boggled my mind. How is it that someone can toil their lives away, working long hours, enduring mental and physical stress, and not be adequately compensated?
Who decides what’s fair for someone to be paid? Is it consumer demands? Is it aggregate consumer choice? Or is it completely arbitrary?
Bregman looked at several occupations that don’t necessarily create more wealth for the society or even contribute to its well-being, however, are given huge payouts.
He describes people getting:
rich without lifting a finger
He uses examples such as Wall Street traders, who shuffle wealth around without actually creating anything of tangible value.
How is it possible that all those agents of prosperity; the teachers, the police officers, the nurses, are paid so poorly while the unimportant, superfluous and even destructive shifters do so well?
That your work happens to serve a weighty public interest and requires lots of talent, intelligence, and perseverance, doesn’t automatically mean you’re raking in the cash or vice versa.
Down and out in Paris and London is definitely one of my favourite books. When I was half way through reading, I distinctly remember having to fight the urge to start over; I found it that good. ✨
At some point close to the end of the book, Orwell contemplates beggars and how they make their money. He compares their trade to that of ordinary ‘working’ men.
There is no essential difference between a beggar’s livelihood and that of numberless respectable people.
It is a trade like any other; quite useless, of course--but, then, many reputable trades are quite useless.
Beggars expend a large amount of effort, working long hours in unfavourable conditions, however make very little income.
An accountant works by adding up figures. A beggar works by standing out of doors in all weathers and getting varicose veins, chronic bronchitis, etc.
In practice nobody cares whether work is useful or useless, productive or parasitic; the sole thing demanded is that it shall be profitable.
…he has merely made the mistake of choosing a trade at which it is impossible to grow rich.
The argument isn't that everyone should get equal pay, however I find extremely large pay differences alarming. I haven't found an answer to the question of fair wages and large pay disparities and I believe that this is something I will never truly understand.
Looking at a conversation between Levin and Oblonsky in Anna Karenina (published in the 19th century), shows that this contentious issue has been long debated.
Levin: All profit that is out of proportion to the labor expended is dishonest.
Oblonsky: But who is to define what is proportionate?
Levin: Making profit by dishonest means, by trickery, such as banking for instance. It is an evil- the amassing of huge fortunes without labor.
Oblonsky: But you have not drawn the line between honest and dishonest work. That I receive a bigger salary than my chief clerk, though he knows more about the work than I do- that’s dishonest I suppose?
Levin: I can’t say.