It Looks Like Lots of Workers Aren’t Paid What They’re Worth
There’s a growing sense that compensation is out of line at both ends of the income spectrum.
The wages of work.
Photographer: Dave Einsel/Getty Images North AmericaAre you paid what you’re worth? How about other people? This might sound like a simple question, but it’s actually incredibly complex and difficult to answer. Yet the answer may figure in the very stability of American society.
There is a theory in economics that says that workers get paid their marginal product of labor. This means that an employer pays a worker exactly the amount of money it would lose by firing that worker. The logic is intuitive — if a worker earned less than her marginal product, some other equally efficient company could make a profit by hiring her away. If she earned more, some worker with similar skills would come in and offer to do the job for less.