Academic journal article Erasmus Journal for Philosophy and Economics

On the Very Idea of a Just Wage

Academic journal article Erasmus Journal for Philosophy and Economics

On the Very Idea of a Just Wage

Article excerpt

I. Introduction

In 2013, Harvard economist N. Gregory Mankiw was widely excoriated for his attempt to defend the incomes of the top one per cent in America. Led by Robert Solow, who lamented the way that Mankiw's "cheerful blandness" drew attention away from the "occasional unstated premises, dubious assumptions, and omitted facts" in his argument, critics were quick to pick apart almost every aspect of the article (2014, 243). ("The 1 percent needs better defenders", declared The Economist magazine.) And yet there is one, highly problematic presupposition that not only went unquestioned, but was even accepted by many of Mankiw's critics. Mankiw at one point observes that, "[i]n the standard competitive labour market, a person's earnings equal the value of his or her marginal productivity" (2013, 30). He then goes on to treat this conception of marginal productivity as equivalent to that individual's "contribution to society" (30). On this basis, he assumes that if "the Left" has some concerns about the distribution of income, it must because of the "various reasons that real life might deviate from this classical benchmark" (30).

It is no surprise that if one treats the market as a system of natural justice, whose essential tendency is to ensure that the principle 'to each according to his or her contribution' is respected, then this will generate an enormous presumption in favour of the pattern of wealth distribution that it generates. Indeed, one could see in the article Mankiw struggling even to understand what sort of concern could be animating 'the Left'-after all, why would you not want to reward people based on their contribution? And yet, the suggestion that 'marginal productivity' corresponds to some intuitive or morally compelling basis for the distribution of reward is one that was intensely debated in the early 20th century, and is widely regarded as having been refuted. More generally, the idea that marginal productivity is equivalent to contribution is just one example of an unfortunate tendency many people have of taking concepts that are drawn from everyday morality and the informal social sphere (or what Jürgen Habermas refers to as the 'lifeworld' [1987]), tailored to mediating face-to-face interactions among individuals, then 'reading them in' to patterns that arise in a market economy.

Over the course of his article, Mankiw actually articulates three rather different principles that he takes to govern the reward of labour in the market. In the introduction, he claims that "because people earn the value of their marginal product, everyone has the appropriate incentive to provide the efficient amount of effort" (21). This suggests a consequentialist perspective, according to which wages are largely about providing the correct incentives, with an eye toward the more general goal of promoting economic efficiency. Later on, however, prior to articulating the rather different view that reward reflects contribution, Mankiw suggests that higher reward is associated with superior "talent", and that the relative lack of intergenerational mobility in the united states is due to the heritability of major dimensions of talent, including IQ (25). The issue of 'talent', along with its supposed rewards, has also played a major role in recent philosophical discussions of market inequality.1 And yet this issue is a rather marginal one in modern labour economics, one that arises primarily in discussions of the ability of 'superstars' to command economic rents.2 It is not central to any discussion of everyday wage differentials. Indeed, there is a large empirical literature on inter-industry wage differentials, all of which suggests that various aspects of 'ability', including IQ, play no role in explaining the prevailing patterns.3 So again, it is very far from obvious that a principle derived from small-scale cooperative interaction, like the idea that 'talent' should be related to greater reward, can be read into the operations of a market economy. …

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