Rebecca Lowe: Why we should — and shouldn’t — be concerned about pay

Work is a concept that incorporates many activities, with vast variations between time and place. The online Oxford Dictionaries’ most relevant definition, for the purpose of this essay, is ‘mental or physical activity as a means of earning income’[1]; it seems an obvious starting point to think of work as recompensed effort. Yet, work is also clearly both more and less than that. This is not least because many people would argue that it doesn’t necessarily need to involve formal recompense, and certainly not along the lines of the dictionary’s suggestion of an income.

The philosopher Michael Oakeshott talks of work as the ‘activity of exploiting the natural resources of the world for the satisfaction of human wants’.[2] And this leads us away from simply thinking about what work might be. Rather, why is it that we do this thing — work — and how does the answer to that relate to its definition? Do we work solely to satisfy our wants? And is work always undertaken ‘for’ recompense?

First, it seems clear that work has great value of many kinds for human beings. On top of the possibility of it affording them an income, work can give someone the sense of achievement that comes from a chance to use and improve their skills. It might also give them the sense of having gained a ‘place’ in society, which in itself can lead to the realisation of dignity, respect, and a sense of community. For the purposes of this essay, however, it makes sense to focus on the instrumental value of paid work — not least because much of the deeper value above can be found in activities aside from those classed as paid work.

On our standard understanding of the term, work provides money (or the like, such as goods in a bartering system), which the individual (and/or their household) can use to attain food, shelter, and other basic necessities, as well as, perhaps, the luxuries they desire. In this basic sense, income is clearly valuable because of what can be done with it, and the potential or power afforded to people through that. And this has bigger societal worth: individual progress enhances societal progress in terms of increased economic potential, and other socially beneficial outcomes.

It’s unsurprising, therefore, when people have concerns about pay that are beyond their own pecuniary situation. And, at the moment, we see a great deal of this. Employment is at a record high, unemployment is at pretty much a record low, and the amount of people who are self employed also continues to rise — but widespread concern about pay is undeniable, and some of this is well grounded.

It is well known, as the ONS points out, that, although, ‘overall, earnings adjusted for inflation in 2018 were at a similar level to 2011,’ nonetheless, ‘the level in 2018 was 3.7 per cent lower than in 2008, prior to the financial crisis’.[3] Of course, there are many further stories within this — positive and negative — about part-time and full-time work, regional differences, and differences charted by gender, socio-economic background, age, and much more. But it is true, in simplistic terms, that over the past decade, employment has been preferenced over pay, here.

Further fears about pay rates are often more complex. The large-scale trend of income inequality in the UK over the past thirty years is usually regarded as flat, yet many current concerns about pay are related to relative positioning within the distribution, as opposed to absolute changes over time, or whether people are being paid what might be seen as a fair wage, in some sense, for the work they do. Year-on-year changes to someone’s pay — or the trends of their incomings over their lifetime — are of vast personal significance, but what about these bigger-picture relative considerations?

A current focus on positioning is owing not least to the way in which — also over the past thirty years — the ‘one per cent’ (and the 0.1, and 0.01 per cents, etc), have pulled away at the top of distribution. Although the relative success of this group (and its subsets) doesn’t seem to have hurt median living standards — in some ways, it may have helped to advance them — any widening of the distribution provides an unsurprisingly strong narrative for those keen to criticise on the grounds of equality’s intrinsic societal value. This is an important point in itself, and other important questions remain regarding distributional equality’s instrumental value — in fostering social goods such as happiness, for instance.

So, what’s the answer? Well, approaches focused on finding ‘solutions’ to such things usually drift into economic interventionism, or risky attempts to drive societal norms from on high. And it’s already the case that most people’s incomings are substantially adjusted through taxation (and, sometimes, transfers), and many people’s income is, in a further sense, fixed by the state. That the UK has a minimum wage means that pay at the bottom end of most sectors is standardised and regulated. Yes, this has helped many people gain extra income, but it also has detrimental effects on the flexibility of the labour market in terms of compressing pay differentials, and can be particularly problematic for lower-skilled workers and small businesses.

Further standard proposals, on top of these current measures, or the usual calls for yet more redistribution through tax, typically emphasise the introduction of pay caps or ratios. And there are certain areas — those substantially funded by the taxpayer, or providing services such as education — where it’s undeniable that there is a special public interest in institutions’ spending practices and other financial activities. But, even in those special areas, the case for mandated pay controls seems weak. This is not only owing to well-grounded economic fears, such as the way in which such practices hinder institutions’ attempts to attract the best candidates, but also relates to understandable unease about who it might be who would drive or enforce these controls. Although concerns about the distribution of incomes are understandable, and such information is relevant to any full assessment of a nation’s economic welfare, the risks of hardcore intervention are not limited solely to unintended economic consequences, therefore.

Fundamentally, attempting to mandate pay from on high for these reasons implies a misunderstanding of what pay is — and certainly in terms of the market-based conception. As the Nobel laureate John Hicks explains, the determination of wages is a ‘special case’ of the general theory of value: the demand for labour is derived, because, generally, it is what the labour produces that is valued.[4] It is not that lower-paid workers are valued less, therefore, but rather that the output of the work they do — in a purely financial sense — does not command a high reward, as set by demand.

To leave this to run its natural course, is not, however, to leave such people to the wolves. (And, as above, it’s certainly not the case, here, that this is left to run its natural course.) When people are in need, a good society will protect them, through the voluntary goodness of individuals, and, where necessary, through some form of organised ‘safety net’, or social minimum. A general focus on living standards, rather than on income distribution, will ensure that, regardless of people’s ‘worth’ within the labour market, nobody is left wanting. But whether that wanting is limited simply to our basic needs, or whether it extends to the wants and trappings of a higher standard of living, is largely for people within a society to determine, consensually. Oakeshott tells us that people work to satisfy their wants; sometimes more or less than work is needed.

 

[1] https://www.lexico.com/en/definition/work

[2] Michael Oakeshott, Work and Play, First Things, 1995, https://www.firstthings.com/article/1995/06/003-work-and-play

[3] ONS, Employee Earnings in the UK: 2018, 2018 https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2018

[4] John Hicks, The Theory of Wages, Palgrave Macmillan, second edition 1963 (1932)

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