On Thursday, I was fortunate enough to get a ticket to see Michael Sandel speak at LSE. I have attended several events at LSE in the past two years and this was, by some margin, the best I have seen. Michael was delivering the first of three lectures and the subject for discussion was whether bankers should be paid more than nurses. Although this type of discussion is commonplace in our classrooms, Michael’s background as a philosopher meant that the event had me thinking about the issue in new ways. The style used relies almost entirely on contributions from the audience and makes it difficult to summarise but what follows is my best effort.
The three debates are to be broadcast on Radio 4 during the Easter break. They should be essential for any Oxbridge pupils or those considering Economics or Philosophy at degree level. Prof. Sandel has also made his Harvard lectures available for free. I consider them on a par with the best of TED and those of you with pastoral responsibility should find them very useful indeed.
In support of the fact that bankers should get paid more than nurses, the following points were raised:
1. Pay should be based on economic worth to society; the ability to create wealth should be valued. Bankers provide a less direct benefit to society.
2. Pay reflects creativity and intelligence (Steve Jobs cited)
3. The market has determined that the wages of bankers should be higher than those of nurses – if people were not willing to pay for them, the wages would not be so high. Aggregate choices of society should determine wage rate.
4. People’s career is their choice so people can choose to pursue higher or lower paying jobs. Doctors choose higher paid jobs knowing that it will be time-consuming, stressful and full of responsibility but also knowing that it pays well.
5. Pay is correlated to the amount of time needed to acquire the skills of the job.
6. The market is the best way to determine value of a good. Using an intrinsic value requires somebody to determine the value and is therefore open to subjectivity. This point was further extended by arguing that it would be better to fix the distribution of wealth rather than try to limit the level of pay.
7. The pay reflects a combination of non-pecuniary factors which would be impossible for a third party (non-market actor) to determine as the value differs for each individual.
8. If all things were left to the free market (i.e. including health care) then the inelasticity of demand for health care would ensure that nurses and doctors were paid more.
9. Many opportunities are provided in developed economies to enable people to overcome less advantageous situations
There were also several points which disputed some of the above
In response to point 1
• Income inequality is detrimental to social wellbeing
In response to point 2
• Intelligence and ability are a function of natural gifts and nurture, neither of which are the result of the individual concerned and therefore wages determined by these things are subject to the ‘justice of the universe’ and are therefore arbitrary and based on luck.
In response to point 3
• The free market allows those with more social power to influence the wage rate
In response to point 4
• This may explain the existence of a difference between bankers and nurses but not the scale of the difference.
• Bankers do not necessarily work harder than nurses so any pay difference of the basis of effort is invalid.
In response to point 7
• The market does not value different types of responsibility effectively either – the responsibility of a nurse (human life) is given less value than that of a banker (money).
Following this discussion, there was an excellent summary of these points before an attempt to reach a conclusion. Michael used two questions to try to reach an agreement.
Would the market wage rate be fair if there were equal opportunities?
Some felt that it would, other disagreed due to one of two reasons:
i. the fact that inequality of income breeds inequality of opportunity and therefore such a situation could not be maintained
ii. that even equality of opportunity would not be enough as a person’s success is still dependent on things over which they had no control e.g. their work ethic which, it was argued, is a result of nurture.
Would a perfect meritocracy make the market wage rate fair?
There were those who believed that it still would not on the basis of a higher level of luck. For instance, not only is Wayne Rooney fortunate enough to have been born with the skills, he is also fortunate that he was born in a time when those skills were valued so highly. Therefore even a perfect meritocracy would not necessarily create ‘fair’ pay.
The overall conclusion was that it is probably right that bankers are paid more than nurses but that the magnitude of the difference between the highest earning nurse and the highest earning banker cannot possibly reflect a difference in ability, skill, effort or value and therefore was ‘unfair’
Add these revision guides and worked answers to your essential revision resources for AS & A2 Economics exams this summer. Our revision guides are brand new and bring your tired old...