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6.2 What Am I Worth?

Learning Objectives

  1. Distinguish the free market from other methods for determining a just salary.
  2. Consider the justification of wage demands.

Bogus Job Offer Converted into a Real Raise?

In her blog FemaleScienceProfessor, the author considers a problem. She’s got a lab research assistant whom she calls postdoc, which presumably means he got his PhD, but he’s still hanging around the university and working for low pay. She wants to give him a raise. The higher-ups, however, won’t approve it. So she writes,

I’m pretty sure I could get a colleague at another institution to send my postdoc an e-mail expressing an interest in hiring him away from my institution (but without any real intention of doing so). With such a letter in hand, there’s a good chance I could get the raise approved. Ethical? No. Should I do it anyway?“Proposed Ethical Lapse,” FemaleScienceProfessor (blog), July 1, 2009, accessed May 17, 2011, lapse.html.

Actually, the ploy may be considered ethical within a purely market-driven framework for setting salaries. Cutting the details and reducing to the situation’s essence, the worker is in effect threatening to not show up for work anymore unless there’s a larger paycheck. That means the employer is being forced to determine if the employee is worth the extra money. The answer will follow from a survey of available workers in the market, and an answer to the question as to whether another can be found to perform the same duties equally well without demanding more pay. If not, then the increase will probably be granted. If a replacement can be found, then things will get awkward as the lab assistant tries to walk back his threat. The walking back is an etiquette problem, though, not an ethical one. From this perspective, in terms of ethics, all that happened is the worker tried to get a raise and didn’t.

Obviously there’s a loose end here; there’s the question about whether the lying is ethical. It depends. Placing the question in the context of organized labor, is it ethical for a union organization to bluff, to say they’ll go on strike while knowing they really won’t? What about less direct lies? An employee that’s actually satisfied with her salary may feign unhappiness in order to squeeze out a little extra. Further, almost all hard-nosed business negotiation entails a bit of posturing. Not many cars have been sold without the seller at least initially insisting, “Well, I can’t possibly go below x price for this fine automobile.” And then, after a visit with the manager or some other contrived breakthrough, the seller decides, “Well, in this special case, maybe I can do a little better.”

In one form or another, a pure market economy occasionally (or maybe frequently) reduces to both sides insisting that they can’t pay more or give less, and in the end, both sides meet somewhere in the middle. As for the previous claims about other jobs or threats to go on strike or insisting that the price can’t possibly come down or whatever, all that washes away when hands finally shake.

The ethical foundation undergirding and justifying participating in business this way is libertarian in nature. It starts with the premise that we’re all independent actors out in the business world trying to accrue the most for ourselves, and others are out to do the same thing. We all know the rules, we’re all adults. When we negotiate a pay raise, we may exaggerate circumstances or say some things that aren’t true. But at the end of the day, no one forces the employer to pay more; it’s the employer’s choice. As for the employee, the empty threat to leave may be presented at the bargaining table, but it’s not so much a lie as a commonly used negotiating technique, just a way of upping the pressure. It is, therefore, ethically acceptable to invent another job offer but only within the confines of business negotiating and only because everyone knows the give-and-take happens that way.

There is another side to this, however. If you don’t accept that negotiating in business is a kind of special-rules game where posturing and exaggerating are customary, then you may want to argue that talking about salaries isn’t any different from any other kind of conversation. If it’s not, then the ethical argument against leveraging an imaginary job offer to force a pay raise finds a solid foundation on the bedrock duty not to lie regardless of the circumstances. For anyone who begins from the ethical foundation that any morally acceptable act must not breach certain ironclad principles—don’t lie, don’t steal, and similar—it becomes impossible to justify making up a nonexistent job offer, even if that’s the way the game of business is being played by others.

The Role of the Larger Community in Determining Wages

There are two broad ways to get a fix on your own economic worth. One operates within the open market: economic free agents meet and sessions of no-holds-barred negotiations result in an answer. The other broad approach to setting wages places the issue within the context of a larger community. Here, it’s not so much that we’re bargaining individuals dealing to get the best possible result; instead, we’re part of a business organization and a larger society, and wages get distributed across it in accordance with guidelines and norms. There are multiple kinds of guidelines. They include

  • my value to the organization,
  • the ability of the organization to pay,
  • the community wage level,
  • the wages paid to other employees in the organization,
  • my experience and seniority relative to others in the organization,
  • the future jobs a post may prepare me for.

Trying to determine what a fair salary would be for postdoc in terms of his value to the organizationA measure of an employee’s worth in terms of how much of the company’s value and profit the employee generates. requires determining how much of the organization’s profit he actually produces. A researcher in a science lab may, under this system, labor for years without any pay at all if his investigative work fails to produce a marketable product. On the other hand, if after years of labor his research finally yields a breakthrough, his wages conceivably shoot to astronomical levels.

Needless to say, this wage-determining structure won’t work very well for lab researchers or for any kind of job that requires years of labor before any return may be anticipated. It does function, however, for businesses like American Apparel. They pay their clothing sewers a small base wage, and then a large secondary amount that rises or falls depending on their output, on the number of garments they add to the inventory. In essence, each week workers bring home a paycheck corresponding with the value they’ve added to the company. That means the relation between the sewers and American Apparel is fundamentally cooperative; it’s not a worker negotiating against the organization but the two laboring together and splitting the fruits of the efforts.Nick Schou, “The Low Cost of High Wages,” American Apparel, OC Weekly, December 28, 2005, accessed May 17, 2011,

Another broad context into which the wage question may be fitted is the organization’s ability to pay. A lab assistant may choose, for example, to accept a pay cut to help the firm weather a period when no one seems able to invent anything that can be sold. The hope would be that, later on, when someone finally gets that breakthrough and profits zoom, everyone’s wages will shoot up too.

A third context for setting wages is the community wage levelThe standard range of wages paid at a location, usually across a city or a region.. Going back to American Apparel, their Los Angeles factory pays workers more than twice the US minimum wage, plus benefits. That’s not a lot of money for California, but it’s ten times more than what sewers in countries including China make for similar work, which doesn’t mean, within this context, that those overseas workers are being abused, only that salaries should be comparable with what others in the immediate area make. Two employees may receive, therefore, radically different paychecks for the same work, but that’s ethically appropriate if the wage levels are initially set to correspond with local costs of living and standard practices.

Organizational wage levelThe salary range a company sets for its employees, independent of the community wage level and wages as set by other, competing companies. is another way of standardizing employee pay. In this case, a lab researcher would base demands for a raise on the argument that others working in the same lab are being paid more than he is. It doesn’t matter, it follows, how much researchers are being paid at other, competing locations. They may receive more, or possibly less. Regardless, the standard is set within that single organization, and people with comparable experience doing comparable work should receive similar checks.

SeniorityThe measure of how long an employee has been laboring in an organization. With respect to salary, this measure converts to a place on the wage scale. relative to others in the organization also provides a salary framework. Here, the emphasis doesn’t rest so much on abilities or contribution to the organization, it’s the amount of time an employee has been doing it that counts most. In a research lab like the one FemaleScienceProfessor is blogging about, her assistant’s demand for a raise would be based on the idea that he should be getting more than those hired after him, and less than those who’ve been employed longer. There’s a comforting sense of fairness here as the wages get aligned with factors that aren’t subjective; it’s much easier to tally an employee’s time working than to determine how much he might get paid elsewhere or measure his exact contribution to the organization. One drawback to this approach is that it allows little room for rewarding exceptional ability or effort. Potentially, the only reward an employee receives for working more efficiently than others is that he gets more work to do.

This particular drawback to a seniority system for determining wages is called a perverse incentiveIn the area of wages, a structure for determining salary increases that encourages work that is less effective, less efficient, or both.; it’s a system of rewards that actually encourages workers to perform poorly or inefficiently. Take the case of American Apparel’s sewers and imagine that wages were determined solely based on the length of their employment. Sewers would have little reason to produce more garments than their workmates. They may even feel like their main task at work each day is to find as many ways as possible to rest and not do anything. Why not? Their wages won’t be affected. Obviously, in most private enterprises, slackers like these find themselves out of a job. But in sectors where firing individuals is extremely difficult—government jobs being a prime example—a seniority system for setting wage levels threatens to incentivize glum, nonresponsive employees.

Finally, pay may be calibrated by the future prospects the post creates. Here, the lab assistant may complain about low pay, but the response may be that the particular lab where he’s working is quite prestigious, and gaining experience there will allow an advantage against other candidates when he goes out to find employment elsewhere later on. The wages lost now, the reasoning goes, will be more than recouped in the future.

An extreme form of this future-prospects salary structure is an internshipLow-paying post workers accept to gain valuable experience.. This is a short-term job with little pay and few benefits. Sometimes, there’s no pay at all. The upside is the experience. When it’s added to the résumé, it should make a job seeker more attractive to employers. If everything works, the time may be a good investment, a good way to get into a line of work, or get in at a higher level. The ethical problem, however, lies in the possibility of abuse that’s unavoidable when someone is working essentially for nothing. Here’s a snippet from an entry on Craigslist:

I agree that calling work for no pay an ‘internship’ is just a fancy spin for disrespecting the talents and the person being ‘used’. Unfortunately, in this society…many people think it’s ok to offer no pay for legitimate work.Craigslist San Diego, “Comments RE: internship posts& low pay,” January 5, 2010.

He might be right. This complaint is definitely right if the organization offering the internship knows beforehand that the worker’s prospects in the market won’t really be improved by the experience acquired. In that case, it seems like an internship really is just a “fancy spin for disrespecting the talents and the person being used.”

There are two kinds of questions to ask about a worker who’s laboring for low (or no) wages with the idea that the experience will pay off in the long run. The first involves employers implying there’ll be improved job prospects while knowing there probably won’t be. The other is more prudential: assuming the employer is acting in good faith, the worker still needs to ask, “Is it worth it?” It’s impossible to know the answer beforehand, but by making the best judgment possible you can get a grip on the question about whether a higher wage ought to be demanded.

Conclusion. For employees trying to measure their worth in business—how much they ought to be paid for their work—the guiding question is, “What are the criteria used to measure whether a paycheck is too fat or too lean?” Are wages set by the market, or is it my value to the organization or something else that determines the pay scale?

Key Takeaway

  • An appropriate salary level may simply be the result of the hardest negotiating possible, or it may be determined by broader guidelines.

Review Questions

  1. How can an employee ethically justify inventing a job offer in order to pressure the boss into granting a raise?
  2. From the employee’s perspective, in what line of work might value to the organization function not very well as a gauge for setting salary levels?
  3. How could a company justify paying accountants in its St. Louis office less than accountants in the New York City office?
  4. From the employee’s perspective, in what line of work might experience and seniority function well as a gauge for setting salary levels?
  5. Does an employer have an ethical responsibility to offer an intern a job at full pay once the internship is successfully completed? Why or why not?