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Reich writes: "What someone is paid has little or no relationship to what their work is worth to society. Does anyone seriously believe hedge-fund mogul Steven A. Cohen is worth the $2.3 billion he raked in last year, despite being slapped with a $1.8 billion fine after his firm pleaded guilty to insider trading?"

Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)
Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)


Work and Worth

By Robert Reich, Robert Reich's Blog

03 August 14

 

hat someone is paid has little or no relationship to what their work is worth to society. 

Does anyone seriously believe hedge-fund mogul Steven A. Cohen is worth the $2.3 billion he raked in last year, despite being slapped with a $1.8 billion fine after his firm pleaded guilty to insider trading?

On the other hand, what’s the worth to society of social workers who put in long and difficult hours dealing with patients suffering from mental illness or substance abuse? Probably higher than their average pay of $18.14 an hour, which translates into less than $38,000 a year.

How much does society gain from personal-care aides who assist the elderly, convalescents, and persons with disabilities? Likely more than their average pay of $9.67 an hour, or just over $20,000 a year.

What’s the social worth of hospital orderlies who feed, bathe, dress, and move patients, and empty their ben pans? Surely higher than their median wage of $11.63 an hour, or $24,190 a year.

Or of child care workers, who get $10.33 an hour, $21.490 a year? And preschool teachers, who earn $13.26 an hour, $27,570 a year?

Yet what would the rest of us do without these dedicated people?

Or consider kindergarten teachers, who make an average of $53,590 a year.

That may sound generous but a good kindergarten teacher is worth his or her weight in gold, almost.

One study found that children with outstanding kindergarten teachers are more likely to go to college and less likely to become single parents than a random set of children similar to them in every way other than being assigned a superb teacher.

And what of writers, actors, painters, and poets? Only a tiny fraction ever become rich and famous. Most barely make enough to live on (many don’t, and are forced to take paying jobs to pursue their art). But society is surely all the richer for their efforts.

At the other extreme are hedge-fund and private-equity managers, investment bankers, corporate lawyers, management consultants, high-frequency traders, and top Washington lobbyists.

They’re getting paid vast sums for their labors. Yet it seems doubtful that society is really that much better off because of what they do.

I don’t mean to sound unduly harsh, but I’ve never heard of a hedge-fund manager whose jobs entails attending to basic human needs (unless you consider having more money as basic human need) or enriching our culture (except through the myriad novels, exposes, and movies made about greedy hedge-fund managers and investment bankers).

They don’t even build the economy.

Most financiers, corporate lawyers, lobbyists, and management consultants are competing with other financiers, lawyers, lobbyists, and management consultants in zero-sum games that take money out of one set of pockets and put it into another.

They’re paid gigantic amounts because winning these games can generate far bigger sums, while losing them can be extremely costly.

The games demand ever more cunning innovations but they create no social value. High-frequency traders who win by a thousandth of a second can reap a fortune, but society as a whole is no better off.

In fact, these games amount to a huge waste of societal resources and talent. 

In 2010 (the most recent date for which we have data) close to 36 percent of Princeton graduates went into finance (down from the pre-financial crisis high of 46 percent in 2006). Add in management consulting, and it was close to 60 percent.

Graduates of Harvard and other Ivy League universities are also more likely to enter finance and consulting than any other career.

The hefty endowments of such elite institutions are swollen with tax-subsidized donations from wealthy alumni, many of whom are seeking to guarantee their own kids’ admissions so they too can become enormously rich financiers and management consultants.

But I can think of a better way for taxpayers to subsidize occupations with more social merit: Forgive the student debts of graduates who choose social work, child care, elder care, nursing, and teaching.  


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+19 # Interested Observer 2014-08-03 09:36
"One study found that children with outstanding kindergarten teachers are more likely to go to college and less likely to become single parents than a random set of children similar to them in every way other than being assigned a superb teacher."

With all due respect I doubt that the enormous number of variables involved, especially the possibly the most important, the parents, can be reliably filtered out of the statistics to give such a conclusion any real meaning.

Not to undercut the obvious point here, that we are over-rewarding a generation of vultures, assistant vultures, and other wankers and parasites who are allowed to write the rules so that they win and win big while attributing their success to a personal superiority affirmed by a clear verdict rendered by the unquestionable justice of the "free market" and its god the "invisible hand".
 
 
+42 # Interested Observer 2014-08-03 09:42
"In fact, these games amount to a huge waste of societal resources and talent."

Richard Feynman once made a similar observation while visiting New York City. His more experienced companion assured him that it was better that this particular class of brilliant people were confined to the shark tank on Wall Street, lest their quasi-criminal instincts lead to great harm in the outside world. Unfortunately, since then they have been granted ever greater opportunities to do great harm from right where they are.
 
 
+38 # gd_radical 2014-08-03 09:52
And let's not forget that only our "best and brightest" are graduates of these elite schools like George dubya....
 
 
+30 # tswhiskers 2014-08-03 11:21
Thanks for redefining that phrase "best and brightest." Nowadays it means "the luckiest and most fortunate."
 
 
+29 # Interested Observer 2014-08-03 11:40
Nothing new here. Dubya was what is known as a "legacy", a rich graduate's kid that the school is all but obliged to admit, affirmative action for the undeserving. A phenomenon that dates from the generation after an elite school is founded. In the case of Yale and Harvard this is before the founding of the nation, 1701 and 1636 respectively. No pretense of best or brightest here.
 
 
+10 # carp 2014-08-03 12:34
30 years ago my wealthy republican bil who became even more wealthier during the Clinton administration told me THEY all go to the same schools. THEY all have the same mentors. THEY all have the same rocket up their behinds. Political party means nothing. That is more true today than it was yesteryear.
 
 
+3 # ericlipps 2014-08-04 03:59
Then why aren't more of THEM Democrats?

I'm sorry, but political party does mean something; the Republicans have been the party of privilege since the 1860s.
 
 
+41 # fredboy 2014-08-03 09:59
One's work has little social value unless (1) you work to help others (directly or indirectly) or (2) you use the resources of that work--pay, learning, products, services--to help others.

Remember, it's called a "society." And that notion only works if we are helping others. Indeed, helping all who need help. And helping sustain others by honoring and protecting our life source, Earth.
 
 
+31 # cmp 2014-08-03 10:24
In 1993, I was taking Industrial Engineering at an elite engineering school back East.

Just, one of our projects in one of the classes (Operations Research) was to develop algorithms for maximizing the the size (# of people) and magnitude ($) of the "delinquent pool" for maximum profit on credit cards..

I was only student who approached the Instructor and asked "is this extreme model necessary for study? Don't we have a world of great issues we can apply math too? Do, the chin ups too??" He just smiled and that was all...

I can't even imagine Academia today. I can't even, imagine...
 
 
+17 # Jim Young 2014-08-03 14:40
Quoting cmp:
...one of our projects in one of the classes (Operations Research) was to develop algorithms for maximizing the the size (# of people) and magnitude ($) of the "delinquent pool" for maximum profit on credit cards...


Elizabeth Warren, in her book "A Fighting Chance" mentions addressing a meeting of major bank employees years ago about how people got into credit card debt, and how to reduce it. Seems many wanted to discuss it, but the senior exec silenced them all by saying that was how they made it so profitable.
 
 
+10 # cmp 2014-08-03 18:34
@Jim,
Thanks for the tip. I will see if I can find a copy of that book. "Life," - has been getting in the way of my reading lately. (haha) So, I could really use a good book right now.

If she is a candidate for President in 16, I will certainly be volunteering early and hard for her campaign down here in AZ.. I, can only hope so. She's a great woman!!!
 
 
+29 # elizabethblock 2014-08-03 14:13
Let's be careful how we use the word "earn." Let's not call people "high income earners" who are, in fact, high income recipients. And for god's sake let's not call them job creators when they are nothing of the kind.
 
 
+13 # NAVYVET 2014-08-03 14:40
True "earners" need to be contributors to society. They once were master crafts persons in city guilds and jacks/jills-of- all-trades in rural villages who cobbled and brewed beer and sewed gloves and baked whole grain bread and sewed shirts by hand, then sold handsome goods out front and lived upstairs. Whether or not they became Luddites and fought back, they lost and were forced to labor in the dark satanic mills of the industrial revolution. True earners were also the family farmers who grew food without artificial anything (organic, though no one called it that) from their own carefully selected seed, to be bought at local markets and eaten in season. Whether or not they were enclosed out of their smallholdings, forced to sharecrop or beat down by the bankers, they also had only 2 choices: city labor or starvation. True earners were the small retail and manufacturing businesses from mom & pop corner grocers to bicycle shops, home builders, machine shops, garages & foundries. They were the world's real job creators and innovators, and the only ones who could possibly have turned capitalism honest, if monopolies could have been prevented by law. All the others were, then as now, merely paper-pusher hangers-on who licked up as much of the gravy as they could channel their way. Now they have it all.
 
 
+11 # JPS07 2014-08-03 14:52
Well I can hear someone pointing out here that the emperor has no clothes. Thank you Professor Reich. Seriously! Bit of a timid whisper in this case but definitely rather alarming, no? No!
It's true, isn't it? We've all been fooled! Capitalism doesn't work for the benefit of society after all, in spite of everything we've been told.
Capitalism works quite well for individuals with little social conscience. It works very well for individuals with no social conscience. But it works best of all for psychopaths. This has been pointed out before. See for example http://www.commondreams.org/views/2011/06/05/rise-second-string-psychopaths.
If you're motivated by a social conscience, if you have a vocation (as it used to be called), or if you're an artist, capitalism is not for you. Tough. Sorry it's the only option in stock. (ahem!)
Since the great deregulation of the markets, mostly during the 1980s, the genie of capitalism has escaped from the bottle. Capitalism has ARRIVED ON STAGE! And now we begin to see it in it's true form. And it's unredeemable.
It's no good trying to find a new or bigger bottle to put it in. Wealth tax won't work. Financial transaction tax won't work. Always a way round taxes. As we've seen.
Picketty has a stab at redemption, but doesn't ring true to me. Or quite a few others, see for example http://truth-out.org/opinion/item/24489-the-compelling-conclusion-about-capitalism-that-piketty-resists#VIII
There must be an alternative out there!
 
 
+14 # skipb48 2014-08-03 16:11
JPS07- "There must be an alternative out there!"
Well there is, it is called Democratic Socialism and it seems to be working just fine in countries like Sweden. We were not doing so bad until the Reagan administration. I know he was a nice old man and nobody wants to blame the Teflon man, but he started all this deregulation thing that has caused this mess. That and the no compromise position that started with The Contract With American by Gingrich and was intensified by the Tea Party.
Capitalism, Socialism all are bad in the pure form. It's all about moderation.
 
 
0 # tgemberl 2014-08-09 17:08
Skip,
I like the system in Sweden but I don't think you can call it "democratic socialism." It's capitalism with redistribution. "Socialism" means that nearly all the means of production are socially owned. Sweden isn't socialist in that sense.

I believe you can have capitalism with redistribution. As long the citizens recognize the danger of wealth accumulation and its influence on politics, it can work.
 
 
+1 # EWilliams 2014-08-03 16:05
Are we saying that women's work is denigrated?
 
 
-18 # Dennyc 2014-08-03 16:54
Has Mr. Reich made any comments on Israel and Gaza yet?
 
 
+9 # Robyn 2014-08-03 22:15
We over reward these vultures and their amoral practices to the point where it is ridiculous. We don't need these so called money men who rake in mind boggling amounts of money while bringing down the economy for short term gain.
What we need are nurses, carers, teachers, electricians, plumbers, artists, cleaners, librarians, writers. People who actually contribute to the good of society not raping it. A perfect world would be one where a person is viewed for what they do and not what they are worth. Too bad that society isn't smart enough to realize that.
 

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