On the Very Idea of a Just Wage: Response to Critics (Just Wages Series)
In this post, Joseph Heath responds to three critical engagements with his paper, which have been published over the previous three weeks on Justice Everywhere (and in full in this EJPE symposium).
My central objective in writing this paper (“On the Very Idea of a Just Wage”) was to respond to the reappearance of what Paul Krugman has referred to, somewhat abusively, as a “cockroach idea.” The thing about cockroaches is that, no matter how many times you kill them, they keep coming back. Similarly, there are some ideas that, no matter how many times they may be refuted, nevertheless keep reappearing, or get “rediscovered” by people who consider them fresh insights.
The idea that the marginal productivity of labour represents the “contribution” that an individual worker makes to production is a cockroach idea in this sense. It is something that many people would like to believe, because it implies that the natural tendency of markets will be to set wages at a level that corresponds to an intuitively plausible principle of distributive justice (i.e. “to each according to his or her contribution”). It was, however, intensively debated in the early 20th century and rather decisively rejected.
Thus I was surprised to see it making an appearance in Gregory Mankiw’s article defending income inequality. I was even more surprised to see that many of Mankiw’s critics seemed to accept the premise. Instead of just calmly stepping on the cockroach, they were instead pulling out the argumentative equivalent of a shotgun and blasting away, taking out the cockroach, but at considerably greater cost to the surrounding decor.
To take this out of the realm of metaphor: instead of pointing out that wages do not reflect contribution, critics like Robert Solow were instead accepting this characterization of wages, but then claiming that contribution is determined by natural ability, and since the distribution of natural ability is arbitrary from the moral point of view, individuals cannot be held morally responsible for the contributions that they make. This echoes something that John Rawls once said, and that many left-wing liberals have since repeated, that I have always found cringe-inducing.
To see what’s wrong with this argument, consider how it could be applied to a person like me. As a tenured university professor, my employment provides me with an extremely attractive package of income, leisure and social status (although as a humanities professor, sadly, my salary only puts me in the top 2%, not the top 1% like Mankiw). “So why do you get to enjoy this life of privilege?” someone might well ask. “Why not replace you with one of the dozens of unemployed philosophy PhDs, who would happily do your job for half the salary or less?”
The natural response would be to say that I am better at doing philosophy than these other people. I might point to my many books and articles as evidence of this. The Solow-Rawls response to this would be to say, “yes, you do seem to have a certain aptitude for philosophy, but you’ve done nothing to deserve that, you were just lucky to be born that way. And so you do not deserve any of the accolades that come from the exercise of those talents.”
So far this is controversial, but not catastrophically so. The next step is where things really go off the rails. When told that doing philosophy is just a “natural ability” that I have, my inclination would be to protest. “I wasn’t actually very good at philosophy when I started out, but I proceeded to work and study extremely hard for a decade to get better at it, before landing a job. I’ve been working pretty hard since then too. All those books didn’t write themselves.”
“Yes it’s true,” goes the Solow-Rawls response, “natural aptitude is not sufficient, people also have to make an effort, in order to realize their talents. But this is also arbitrary from the moral point of view, because the capacity to exercise effort is a natural endowment, which individuals have done nothing to deserve. You’re just lucky to have been born a hard worker.”
Anyone who can’t see the problem with this argument should stop for a moment and reconsider that life choices that have led them to this point. There are three things wrong with it, two of them obvious. First, this argument is almost always made in bad faith, since none of the humanities professors who make it actually subscribe to the biological determinism that it presupposes. Second, it amounts to the claim that hard work is not a legitimate basis for differential reward. This view is not just morally counterintuitive, it is morally offensive to most people. If this is what it means to be an egalitarian, then that is a powerful reason not to be an egalitarian.
And finally (somewhat more esoterically), the argument is actually just a disguised form of skepticism about freedom of the will. For any presumptively free choice, which might serve as the basis for an ascription of responsibility, it posits a causal antecedent to that choice, which is itself unchosen, and therefore undermines the ascription of responsibility. But the same move could be used to undermine any ascription of responsibility. Thus it is the argumentative equivalent of using a nuclear bomb, rather than a shotgun, to kill the cockroach.
The most interesting thing that I learned from this symposium was from Andrew Lister, who documents the history of this argument. I was highly amused to discover that the position was initially issued as a challenge to socialists, successively elaborated by Frank Knight, Friedrich Hayek and Milton Friedman, who wanted to know why financial capital should be treated so differently from human capital. I did not realize that Rawls, when he made his famous remarks, was actually biting the bullet on this point – boldly embracing a view that was initially put forward as a reductio of his position.
As for Peter Dietsch, I don’t think that his argument shows what he would like it to. My claim was that market-determined wages will be largely orthogonal to considerations of distributive justice (fairness, desert, etc.). Dietsch is certainly correct to observe that if some fraction of the wage is an economic rent, and the wage is “too high,” from the standpoint of distributive justice, then making the market more competitive will promote both efficiency and fairness. But he ignores the fact that if the wage is “too low,” from the standpoint of distributive justice, then making the market more competitive will promote efficiency at the expense of fairness. My point about wages being “orthogonal” is that there is no reason to think that they are more likely to be too high than too low – Dietsch, however, simply assumes that they will be too high, and is thus presupposing, rather than demonstrating, the falsity of my central thesis.
With respect to Boettke, Candela and Woltz, it is difficult to know what to say. I will ignore their attempt to shoehorn me into some preformed conception of the standard neoclassical framework, other than to say that their interpretation contradicts the text of my article at numerous points (e.g. see my definition of “market wages” on p. 7). The one point that they are right about, however, is that the way I am thinking about markets is quite different from their own. My approach is to start with an abstract normative principle, such as Pareto-efficiency (by which I mean Pareto-improvement, incidentally, not Pareto-optimality), or the idea of scarcity pricing. I then conceive of markets as one way, but not the only way, of institutionalizing the commitment to this ideal. I don’t think that markets have any special magic of their own, which somehow makes market outcomes more just than those produced in other ways. Thus I assess market outcomes in terms of the normative principles that I take markets to be instrumental to the realization of.
Boettke, Candela and Woltz, however, believe that markets bring their own normative je ne sais quoi to the table. The way that they articulate this is unfortunately underdeveloped. On the one hand, they make repeated reference to the triumvirate of private property, voluntary contract and the rule of law. This implies something like an “historical” conception of justice in the Nozickian sense. On the other hand, they make reference to the “positive sum” character of market outcomes. This is just our old friend the Pareto principle, the use of which suggests a more welfarist, outcome-oriented standard of assessment. Only the former view would be in tension with my own.
In any case, neither of these two normative criteria have much in common with our “everyday” conception of fairness or desert, which is why they are ultimately not in disagreement with the central thesis of my paper.
Joseph Heath is Professor in the Department of Philosophy and the School of Public Policy and Governance at the University of Toronto. A fellow of the Royal Society of Canada and the Trudeau Foundation, Heath is the author of several books, both popular and academic. His most recent, Morality, Competition and the Firm (Oxford, 2014), is a collection of papers on business ethics and the normative foundations of market economies. He is also the author of Enlightenment 2.0 (HarperCollins, 2014) and, with Andrew Potter, The Rebel Sell (HarperCollins, 2004).
