Should Workers Be Paid Based on Value?

Over and over I hear competing arguments about whether people should be paid a living wage (and implementing a minimum wage to ensure that) or whether people should be paid what the market will bear and if people want to make more money, they should get a better education and job skills.

Both sides have strong cases.  But there is a third way I rarely hear people talk about, which is paying people based on the value they provide, regardless of education or skill level.

It’s funny how people are willing to pay a landscaping service an expensive fee, yet at the same time expect the workers themselves to be paid as little as possible since they are unskilled labor.

Many people seem to equate education and skill level with value, but actually, value is something that is determined by the consumer or beneficiary of a product or service.  This is why business owners and executives can get rich running businesses using unskilled labor.  It is something that provides value.

So the issue is not really whether these low skilled jobs provide value, because they do.  It’s more a matter of who gets paid for providing that value.

Should most of it go to the workers providing the value, or should most of it go to the CEO and business owners who oversee the operation? Does the CEO actually provide 100 or 1000 times more value than the front line worker?

The workers say it should be them that gets most of the money, not appreciating what it takes to create and run a business, while the CEO and business owners think it should be them, not appreciating the fact that the workers are the main reason why they are making money.

So who should get most of the money?  

Both, actually.  It is a symbiotic relationship.  You need both the leaders and the workers to make any business work, and both should be fairly compensated for their efforts.

On one side we have artificial forces raising wages through regulations (such as minimum wage), and on the other side you have market forces that attempt to pay the lowest amount possible.

What if we add a new force, a moral force, where we decide to factor in the value a person is creating, both as an individual contributor, but also as what value their job brings to consumers and beneficiaries of their services.

We have the motivators of greed and self-interest pulling money toward either the leaders or the workers, influenced by forcing one’s will upon another (executives dictating compensation policy, unions demanding high wages, governments issuing regulations). What if we also had generosity and doing the right thing?

If we truly want to fix the problem of income inequality, and the problem of people working full time and still living at poverty levels, we need to do more than pass some laws.  We need to change the way we think about compensating people.

I suggest we start thinking more along the lines of value provided, rather than simply a factor of market forces and government intervention.

You don’t have to be educated to provide value.  And it’s the value we should really be rewarding if we want this country to get ahead.

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Scott M. Stolz

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