Do you think money is a dirty word?
Click this link to watch a short video of economist Milton Friedman discussing “Greed” on the the Phil Donahue Show.
Some interesting questions that could have been posed to Phil Donahue during this segment would be:
- Your show is one of the top rated shows of its kind in America. When your agent is negotiating your contract for this show to what extent does the ratings of this show factor into determining the value of your contract?
- Have you ever fired an agent for getting you a great deal?
- Does the network ever pay more expenses for this show (your salary, other salaries, production costs, overhead costs, etc.) than the show earns in revenue (from advertising, ticket sales, merchandise sales, etc.)?
- Do you believe that if you host one of the top rated national talk shows and that you are the primary person responsible for that success that you should be paid a similar salary to other top rated talk show hosts rather than be paid like an afternoon news anchor in a local television market?
- If the network is earning a lot of revenue for this show, do you, as the primary person responsible for the viewership, deserve to take a sizable cut or should the network get to keep most of it and dole out only a small portion to you?
- Are you aware that your salary from this show is multiples of the salaries of many other employees whose efforts enable this show to be broadcast?
- Do you believe that those employees are aware that were they to take your seat that the show would probably not be nearly as successful?
- Do you think these employees resent the salary difference or do you believe that they are happy to be earning a good living doing interesting work for a top rated national show?
- Considering all that we have discussed so far; does being one of the tops in your field, generating a lot of money for the network, providing jobs and careers, giving good exposure to advertiser’s products, and earning a lucrative income from all of this make you a greedy person, a virtuous person, or both?
- Could you provide as many opportunities for other people if you were not in the position to make the kind of income that you do?
Seven Figure Incomes
Is anyone really worth $1,000,000 or more?
Is an actor inherently worth more than a nurse? Is a CEO inherently worth more than a teacher? Is a rock star inherently worth more than a carpenter? Actors, CEO’s, and rock stars are not “inherently” worth more than common folks. However, they do generally earn their pay.
High paid actors earn their pay because a lot of people will pay money to watch them perform. They have special skills that allow them to entertain large audiences. This ability is so rare that only a few dozen are capable of it. The best actors will perform primarily in the movies that offer them the most money. Using a cheaper actor may reduce the movie company’s profits. If a movie company earns $150,000,000 in profits from an actor’s movies in a year then they can afford to pay that actor $120,000,000 for a year. On the other hand, few people are willing to watch nurses perform their work routines let alone pay money for the opportunity. There are also several hundred thousands, if not millions, of people capable of effectively performing the duties of a nurse (though the really good ones are still “relatively” rare). The same reasoning applies to rock stars versus carpenters.
CEO’s earn their pay because they are hired to make decisions that can earn or cost large businesses millions, if not billions, of dollars. The best CEO’s will go to the companies who pay them the most money. Using a cheaper CEO may reduce a company’s profits. If the leadership of a CEO helps a company earn $100,000,000 then they previously had then they are worth the $50,000,000 salary. On the other hand, teachers affect only a couple of thousand kids at most during a career. School districts are government funded enterprises and therefore teachers earn their pay from the government. There are also several million people with the skill sets to be teachers (though the really good ones are still “relatively” rare).
Thomas Sowell points out that the average income of the top ten paid executives is less than half of the income for the average income of the top ten paid celebrities and athletes. Why don’t high paid celebrities and athletes garner the same class warfare rhetoric and resentment? Their income is earned by entertaining lots of people as compared to executives whose pay is earned by employing lots of people. I think it is safe to say that celebrities earn far more money per person directly and indirectly employed through their activities than do executives. Considering how many people are employed by large companies it would make more fiscal sense to show more gratitude to employers than we as a society bestow on entertainers. Not that large companies are saintly but they do provide more employment opportunities than entertainers.
Many people are up in arms over the golden parachutes many executives receive after getting the heave ho from their jobs. Thomas Sowell likens that to a divorce. If the relationship is broke and the best thing to do is to extricate the company from the executive’s influence a quick payoff will give the company a chance to quickly find a better replacement. Fighting the outgoing executive and going to court are also expensive and the company may bleed profits while they spend time trying to avoid the cost of a quickie divorce.
Another comparison would be that of actors being paid for bad movies. I’m pretty sure that Ben Affleck and Jennifer Lopez were still paid a tidy sum for “Gigli” and Dustin Hoffman didn’t go hungry after filming “Ishtar”. They might not be receiving large royalties from those films but the fired executive is not receiving a regular salary and additional company stock either.
Minimum Wage Incomes
Contrary to popular belief, minimum wage is not intended to be a wage for family bread winners. Minimum wage jobs are entry level positions for people who have few work skills.
- Most minimum wage jobs are for young adults and teenagers
- This population has few members who are expected to be bread winners
- Most of these workers live with parents or roommates and so have lower expenses
- The vast majority of people starting at minimum wage receive wage increases within six months
- Within a year most employees starting at minimum wage are earning considerably more than minimum wage (as a percentage increase)
- The more experience and skills employees gain the more income they will earn
Rising minimum wage levels though have a negative affect on job availability. At higher minimum wage levels some jobs are priced out of the market which leads to higher unemployment for young inexperienced workers. Higher minimum wage levels also make the cost of goods and services produced by entry level wage earners go up. This increase in costs impacts consumers of these goods and services who are predominantly low income earners themselves. Rising minimum wage levels create higher costs and fewer job opportunities for the very people the increase is supposed to assist. Providing yet another example of results being opposite of intentions.
If you’re poor and trying to get into an entry level job and you are finding fewer opportunities than you had been led to expect you can thank a politician. They‘ll be easy to find. They’re the ones patting themselves on the back for being so helpful.
Everyone thinks they are underpaid. I do, you do, he does, she does, they do, we do, everyone. Our pay is dependent on many variables but the main one (outside of government work) is based on our productivity. The more profitable we are to an employer the more money and benefits we will earn. The better an entrepreneur manages a small company the more income they will earn.
A coach once said, “The harder I work, the luckier I get”. Certainly words to work by.