This post is, in part, a response to Saturn Smith's
“Let Them Have Bonuses?”
The problem isn't the executive pay is out of proportion, it's actually that it's in proportion.
Suppose you make $10/hr and you ask for a raise. Do you ask for $20/hr increase? You might like that, but if someone's paying you $10/hr, you're not going to get an increase that's twice your base pay unless you've done something well outside your job description. And anyway, usually we'd call that a promotion, not a raise. Lots of places these days target maybe a 1% or 2% raise (that is, something like $0.10/hr or $0.20/hr) though there have been days when 5% or 10% (that is, $0.50/hr or $1.00/hr).
But what about someone who's making $10,000,000 per year. Well, you guessed it, the answer is proportional. That person's not looking for the same $0.50/hr or $1.0/hr raise, but instead a proportional raise. Something like 5% or 10% of the base pay, or $500,000/yr or even $1,000,000/yr. Now that's more like it.
You see? Not out of proportion but in proportion. So basically, the amount of that person's raise (not even the base amount) would buy a lot of employee salaries.
But why the proportion? Well, mostly because it makes things easy to talk about. No one wants to talk about numbers like $10,001,000 per year. Once you're making $10,000,000/yr, do you think you even care about an extra $1,000? I'm guessing not.
And it gets worse, because when I offer you a job at my company and you could make $10,000,000 somewhere else, will I make the offer sweeter by offering you $10,001,000? I'm guessing not again, for the same reason.
So isn't that really the problem right there? A problem not of disproportionality but of proportionality? That people are getting to salaries so high that they can't even feel normal amounts of money any more? Money that would mean a great deal to most of us?
It seems that when you already make more money than everyone else, it takes more to keep motivating you. Something seems wrong about that. Why is that when we see an unmotivated poor person, we say, “forget it, let's not hire him,” but when we see an unmotivated rich person, we say, “obviously we're just not offering him enough”?
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