Your pay depends on your productivity and occupation. If you earn roughly the same as others in your job, with the precise level determined by your performance, then you’re paid market value. And who can question something as objective and impersonal as the market? That, at least, is how many of us tend to think. But, we need to think again, according to Jake Rosenfeld, associate professor of sociology in Arts & Sciences at Washington University in St. Louis.
With his new book, “You’re Paid What You’re Worth,” Rosenfeld challenges the idea that we’re paid according to objective criteria, while placing power and social conflict at the heart of economic analysis.
“The core question that animates me — at least in my day job — is who gets what and why? This is the book I’ve been thinking of writing for a few decades now, and my hope is that I’ve provided a new perspective to everyone out there who has ever wondered about what determines that number on their paycheck,” Rosenfeld said.
Job performance and occupational characteristics do play a role in determining pay, but judgments of productivity and value are also highly subjective, according to Rosenfeld. What makes a lawyer more valuable than a teacher? How do you measure the output of a police officer, a professor, or a reporter? Why, in the past few decades, did CEOs suddenly become hundreds of times more valuable than their employees?
The answers lie not in objective criteria but in battles over interests and ideals. In this context four dynamics are paramount: power, inertia, mimicry and demands for equity. Power struggles legitimize pay for particular jobs, and organizational inertia makes that pay seem natural. Mimicry encourages employers to do what peers are doing. And workers are on the lookout for practices that seem unfair.
Drawing on cutting-edge economics, original survey data and compelling stories, Rosenfeld’s new book shows how these dynamics play out in real-world settings.
Economic inequality in America: How did we get here?
“There is nothing inevitable about our present moment of skyrocketing inequality — of some lucky individuals capturing so much of the nation’s income, while many more struggle to get by,” Rosenfeld said. “We as a country made a series of decisions to get us to where we are, meaning that it is within our control to undo the damage.”
Income inequality in the U.S. is the highest of all the G7 nations, according to data from the Organization for Economic Cooperation and Development. But it wasn’t always this way.
“It’s been a decades-long process of employers gaining more and more power over pay-setting, with many employees relegated to accepting whatever amount their bosses offer,” Rosenfeld said. “A big — though not the only — part of this story is the drastic decline of organized labor in this country, alongside the rise of a new management philosophy that maintains that profits should be redistributed upward, not shared broadly with workers.”
As the recent election and current debate over raising the federal minimum wage has shown, there is growing sentiment among Americans that the current system is seriously misaligned. Yet there is no clear consensus on how to rebalance the system.
“Looking historically and cross-nationally, there really isn’t a clear example of a country that’s managed to share its prosperity broadly and that lacks a powerful labor movement of some sort,” Rosenfeld said.
“So absent a revitalization of organized labor in this country, it’s hard to imagine a steep reduction in economic inequality. But a reawakened labor movement need not look nor act like its mid-20th-century forebear — there are examples to choose from assuming the political and popular will is there.”