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Who earns how much and why?
Against moralism in the income debate

Gegenstandpunkt 3-17

The ideology of fair income disparities

A worker on the assembly line earns less than his boss; the department head more than his secretary, and a banker earns on average more in a year than an ordinary skilled worker in his whole work life.

Why is that?

Because it goes without saying. Because it’s proper. Because every job somehow has its matching pay. Because you can’t paint everything with the same brush. Everybody living in a market economy knows that – no matter what income he has to manage with. If there were no differences in income everyone would be made the same, which is inappropriate and absolutely not all right.

Nevertheless: what, actually, would be so bad about making everyone the same this way? If everyone who’s done their day’s work could enjoy life to the same extent: why is that unthinkable, why would it be improper? Or, the other way around: Isn’t it a remarkable admission if nobody can imagine a market economy without differences in income, which determine whether or not someone’s life is halfway worth living, after all? Very few have a job that yields a decent living; most have to get by with a fraction of what the better off have and need. And this is supposed to be absolutely all right?

But it is not really meant like that. Nobody wants to say that prosperity and poverty — free access to the wealth of goods produced in the world and exclusion from them — necessarily belong to our unbeatable economic system; that would be something like critique of capitalism, god forbid. The idea is that there is some match between money earned and job. As if one and the same yardstick showing thousands per month were applied to the different jobs, and one job ended at the second thousand while the other was only just starting at the twentieth or two hundredth. Differences in income aren’t all right just like that, they are all right because they are fair. Just as the double meaning of ‘to earn’ says: receiving income and being entitled to it belong together. The relation being, by common consent, that income depends on what a person deserves, not the other way round.

At least in principle. In the real working world, everybody, when it comes down to it, knows plenty of cases in which the equation between just deserts and financial remuneration doesn’t quite work out. A landowner earns millions because he has inherited the right lot while a postman is barely able to pay the rent; or parliamentarians once again grant themselves higher allowances for the heavy responsibility of laying down welfare rates: such things are considered scandalous by some people. Similarly, when successful football players earn more in a season than a successful German Chancellor in a legislative period, some people start wondering about the standard supposedly used for measurement. And someone might even dare to ask by what right a successful unskilled worker doesn’t earn too much in a whole lifetime although shift work in a steel mill tends to involve some risk of injury and fitness problems…

Such reflections are not that common, because ‘a little guy’ usually doesn’t compare himself with such bigwigs as football stars and chancellors, it being all too clear that different standards apply to the rich and famous. But this could also make one think something else than that big earners evidently have a special kind of higher merit than people it is supposedly appropriate to pay badly. Maybe it is actually the case that fairness, this lofty value, is quite irrelevant when it comes to different incomes. Maybe there is no common standard by which unskilled workers, football stars, landowners, politicians, etc., are paid. And maybe the reason why a doctor pockets more money than his assistant, and a corporate manager has a totally different income from his stock clerk — this generally being considered absolutely appropriate — is not one bit better than the reason why real estate agents get rich and garbage men stay poor.

Anybody who starts wondering at the peculiar income distribution in the bourgeois world in any case has a good tool for coming to understand the principles at work here. This tool lies in his head, and might start working on the suspicion that the differences between the various jobs themselves do harbor the reason for the very different incomes, but it is not a good one. There is in fact no authority in the whole wide world that ever determines, or could even determine, how much money or money troubles match this job or that. The real distribution of money is regulated by economic necessities and politically enacted constraints. The payment of public servants goes by one principle (which has a lot to do with the power they command) and the payment of blue-collar workers by another (here firms are calculating a necessary cost factor for their business) while income from landed property has its own principle, the income of football stars another, and doctors’ fees yet another. There is only one thing that definitely doesn’t apply: a uniform standard by which all incomes earned are or should be — ‘somehow’ — deserved.

Nevertheless, hardly anybody sees it this way. Especially those who don’t benefit at all, either from the existing distribution of income or from the belief in some fairness prevailing behind it, much prefer to misinterpret their modest situation. They stick to the assumption that the standard for a fair distribution of income has slipped at times, with the result that the wrong people get too much and oneself too little — meaning, not too little for a decent life without worries, but too little by comparison. Totally radical people even dare to suspect that the standard may be calibrated wrong, which is why fair distribution is altogether a permanent problem. For them, the accusation ‘unfair’ replaces any explanation: they unfailingly believe in a standard that is merely conspicuous by its absence in reality; it applies all the more virtually, it should apply, if it doesn’t.

And: What is it that applies or at least should apply? Which merits on the job are measured by this imaginary ideal yardstick showing the thousands per month which, when put to use in reality, keeps on producing the crucial difference between jobs that make life worth living and ones that mean nothing but money troubles after work? What are poverty and prosperity supposed to square with for them to be all right, at least ‘in principle’?

As an answer, no one, not even any critic of the prevailing income (in)equality, can ever think of anything but the same three or four aspects that are supposed to be consistently heeded in our — accordingly so-called — ‘achievement-oriented society.’ And that are all not only incorrect, but also a bit of a lie.

So much for achievement

The criterion for fairly allocating money that everybody always insists on as if it justified all poverty along with the many levels of wealth to boot is known as ‘achievement’ or ‘performance.’ It ‘has to pay off,’ declares, for example, the German government emphatically. They couldn’t have put it better for the unions, who think their members’ ‘performance’ at the nation’s workplaces entitles them to ‘a fair slice of the pie’; or for businessmen either, who use the same argument to warn against increasing the top income tax rate; or actually for anybody looking for a good reason why income differences are necessary.

That much agreement counts against this criterion. It can only be due to the fact that ‘achievement’ can be imagined to be all kinds of things — just nothing that makes sense.

Is it perhaps supposed to mean the effort that a specific job requires? The degree to which someone exerts himself? ‘Output per time,’ in accordance with the physical definition of performance as power? That would at least be a useful definition for distinguishing harder from easier tasks. It’s just that this kind of performance has nothing to do with the kind that ‘should pay off.’ To see this, one doesn’t need to go to extremes and ask if a state secretary makes a ten-times bigger effort than a painter in a German car company, or if a top athlete actually exerts herself one hundred times more than a top cleaning woman working a fifty-hour week. It is already questionable enough whether a normal technician using a computer screen or graph paper to design a part wears himself out more than an unskilled worker screwing such parts together day in day out, forty hours a week.

But nobody is serious about wanting to verify it anyhow. It normally suffices to point to a commonly known fact: often enough someone gets a lot more done than someone else and so earns or deserves more money. On the other hand, everybody knows that the faster worker doesn’t necessarily do the job as well, and it is by no means a sure thing that hard work really pays off. Above all, such differences have nothing to do with the really interesting income disparities that exist — not between quick and sluggish workers at the same job, but between different jobs: that is where those decisive performance differences are supposed to be that absolutely require different income levels.

And which performance differences are these supposed to be? Free-market experts like to maintain that a technician or an administrator or even a state secretary who gets to make all kinds of important decisions faces a more comprehensive challenge, needs to exert finer body parts than muscle, for example the head, and this way expends more of his esteemed person; and that is why more — rather than just something different — is achieved in such offices than in workshop dirt. As if jobs of the lesser kind don’t demand the whole person but draw on only a small part, while the rest, like the mind, can do whatever it wants.

And: is it at least something like that? After all, an organization as well-informed as the trade union seems to see it that way. It does its best to help develop wage scales that make out a duller and more limited job to be lower performance, and therefore assign it less pay. But again everybody knows that this kind of fairness leads to anything but compensation along the lines of ‘more money for more drudgery!’ Quite the reverse: nothing wears a person out more completely than a kind of labor that restricts him to some one-sided and totally blinkered activity; nothing is as utterly exhausting as constantly taxing the same bodily powers and managing to concentrate on keeping it up and enduring it. The fact that this kind of work pays less rather than more does create some free-market order in the world of lousier jobs, but not according to the principle that strain is taken into account and compensated. Quite the contrary: when unions get busy making sure remuneration is exactly tailored to the job, they are establishing a hierarchy of jobs in this section of the occupational world as well. It is precisely the comparatively more pleasant jobs and more easily tolerated efforts that are paid comparatively better, and vice versa — otherwise there would never be a proper career ladder. If each ‘advancement’ away from the drudgery that ruins body and mind — the body through one-sided use and the mind through non-use — yielded less money following the principle of corrective justice (whatever the conversion table), then what would be left of the variety of jobs would be only the variety, and not the well-known fine order that distinguishes those ‘at the top’ so clearly from those ‘at the bottom’: the few worthwhile jobs at one end of the scale and the bad jobs with bad wages for the masses at the other end.

So, many might think of their stress and strain, the wear and tear at work, when they are told that ‘performance should pay off’; but they are mistaken. The hierarchic order of jobs in the market economy, this system by which comfortable and free activities go hand in hand with increased income, easily refutes any such ‘performance orientation.’ That’s why none of its proponents stop there.

So much for ability

For justifying the hierarchy of jobs — which everybody is familiar with, basically takes for granted and therefore never takes a closer look at — the aspect of performance in its banal sense is supplemented by a second criterion which, strictly speaking, completely abandons the notion of performance equality; but who speaks strictly about such matters. The idea is that the thousands that some people earn more and others less are rewarding the abilities that are employed in carrying out a job. So there is no such thing as the ‘performance’ as such that someone delivers more of on the job and someone else less of and whose level determines the amount of income. That is what people are admitting when they justify high and low salaries by pointing out that different jobs require different skills and those who hold the better jobs have to be good at things that someone else could never ever do.

The fact itself cannot be denied: an engineer possesses scientific knowledge that an assembly-line worker has no idea of; a surgeon is good at maneuvers that a nurse doesn’t have down. But this is also true the other way round: pulling in cable harnesses as piecework, doing overhead work on the assembly line, or caring for sick people nonstop and not making any mistakes even toward the end of the day, all that requires skills that a state secretary or a dentist completely lacks. Moving one’s limbs accordingly, for a whole work shift and under conditions that are not at all comfortable, requires skill, strength, insensitivity to pain, and other abilities that hardly anybody who doesn’t have to do such work every day has. When it comes to the better paid abilities, things are often a bit different. What high state officials, managers, or football coaches have to show as their special abilities when pursuing their professions — talking about anything and everything as if ‘the good of us all’ were always the uppermost point of view; letting loose slogans such as ‘work has to pay off again’ or ‘we can only distribute what we have produced!’; first scolding the team and then urging them on; considering wages to be too high while energetically and resolutely investing money — any average family man and regular at the pub does all that too, as far as his means allow, so he definitely has the ability. And this ability shows no particular differences in quality — mainly just the difference of who obeys the command! — as is proven, to cap it all, by every party or business career, from the overzealous junior staff member up to the top man. Basically, everybody already knows from his life experience on the job that the position one is put in automatically makes sure one has the required abilities. After all, they are essentially habits: familiarity with the tasks at hand and developing a routine. In those much admired professions that call for special skills, intellectual or otherwise, for example with surgeons, writers and philosophers, ministers, Nobel laureates, etc., it is no different: constantly concerning oneself with the same material simply makes one expert. That’s why nobody is indispensable even in these higher spheres, least of all those of whom this is said after they die; their passing does not lead to the downfall of state, market economy, science, or cultural life. It’s just the same as in the lower spheres of the working world, where the job likewise creates the proficiency — in the art of bearing up and sticking it out — while accordingly dissipating abilities that are unused and thus superfluous, not least mental ones.

The whole alleged hierarchy of occupational abilities that is supposed to be the basis for the hierarchy of jobs and income thus dissolves into the triviality of different jobs requiring different abilities, i.e., creating them. The supposed ‘superiority’ of some abilities over others is not due to their intrinsic nature, but simply to their belonging to better professions, meaning they are more pleasant to apply and they bring in more money.

So much for education

But isn’t it true that one has to learn more for higher professional skills than for simple jobs? Isn’t it true that better jobs require longer training that first has to be successfully completed? And doesn’t that have to be accordingly remunerated in one’s later professional life?

There is a whole science that has taken hold of this nice idea: education economics. It has turned it into the theory that during the training period ‘human capital’ is accrued — at least to the amount of the missed income one could have earned instead — which will, or at least should, then pay off like an additional savings account in the form of the higher income of a better job. But it’s no use, everybody basically knows this isn’t true either. Knowledge one has acquired and skills one has learned don’t pay off at all taken by themselves. What counts is the interest in paying for the use of educated minds and specially trained limbs — i.e., simply the number of open positions. That is what decides if one’s ‘investment’ in an education was any good for an income and if some qualification or other is worth anything or if the next step is a retraining course. And it is definitely out of the question that a fair ‘return’ for the sacrifices accepted during training is any criterion for payment.

What is indisputable is something else: a career heading toward the better paid jobs normally doesn’t even start without exams being passed. Failure at school sets the course for a downward career, to the unskilled jobs; moderate success opens up the short career path, to mid-level professions; and to reach to the top you have to keep answering test questions correctly, at least more correctly than your rivals. However, that doesn’t mean state-certified knowledge and skills are the thing that is later converted into money and appropriately rewarded with a higher income. It is a matter of no more and no less than fulfilling mandatory career conditions; of meeting requirements by which a higher, outside interest establishes a ranking among career candidates; of being found more or less suitable for entering a job hierarchy that is already in place, in accordance with ‘eligibility requirements’ that may not even have terribly much to do with the profession later practiced. So it is not the case that knowledge and skill give you a better position in the working world. It is the other way round: a lot of better positions — and not even the best and most comfortable ones, they can only be had by inheritance, which is another market-economy job description! — come with conditions that an applicant has to meet; these conditions include exams; and the means for passing exams include the relevant knowledge and skills.

One can of course paint this as a picture in which hierarchically ordered working life is ultimately just about rewarding inner values outwardly according to the principle of fair pay for ability and performance. Isn’t it an ability, in fact a valuable one, to be successful in the selection process all through school and exams? Isn’t it an achievement, in fact the decisive one, to make a good career? Doesn’t the result speak for a person’s most important competence, namely his competence at success?

No, it doesn’t, and it isn’t. The people who know this best are the ones who have successfully overcome a hurdle or two in the selection process. They are afraid of the exams they’re taking even when they’ve conscientiously done all their studying, and for good reason. After all, everybody knows how important the Gaussian ‘normal’ rate of flunkers is in those exams and how unpredictable the results are. After the exam is passed, these intimidated pip-squeaks, who swallowed sedatives to be able to add 17+4 in the right place, turn into self-confident achievers who love to tell anecdotes about how easy their exams were and what fluke may have helped them. And this, too, is not for no reason: exams don’t exist in order to acknowledge a good head. Their purpose is selection. The examining authority chooses among the applicants according to its own considerations and sorts them into a ranking. The candidates’ achievement consists in adapting to the given selection criteria as best they can— adapting themselves and their mind and what they do with it, their eagerness to learn and their thinking. The examining authority then makes its decision, according to its requirements and its considerations, about the ranking in the competition over who has adapted best.

Of course, after the fact every success in competition makes a person a hotshot. Someone who has managed to get ahead is himself all too inclined to see the selection that others have made between him and his rivals as his own brilliant achievement and as recognition of his inner values. And the people around him also share the cockeyed principle of this point of view: they think of success and failure in the competition of careerists not as just that, but as a character trait. That is why they are forever getting all indignant about some unfair exception when every closer look at a specimen of the social elite reveals the sleazy details, the favoritism in office or the coincidences that got a career going. But precisely when a hotshot and the people around him agree about him being an extraordinary case of capability and skill, they are proving the exact opposite: they are fabricating the character mask of a competitive success. He adopts the personal qualities that he likes to maintain are what made him a hotshot and are the reason for his excellent career; and the others admire this lie. In the end, all concerned believe in the circular logic that the better positions in society and the nice income that goes with them are most solidly based on what a person has to do, above all with himself, to get to these positions.

But it’s just no use. The career stages that state and economy have to offer are not one bit explained by congratulating those who have managed to make a career on their success. Nor by successful people liking to be congratulated, as if the income hierarchy and their top jobs in it were their own personal achievement. Of course, one can take the easy way out and view the mere fact that someone has made a career as performance and ability: then it is necessarily ‘performance’ that pays off in the capitalist job world. But then one should admit one is clinging to the foolish belief that someone who earns a lot of money must somehow deserve it!

So much for ‘To each his due!’

This dogmatic short-circuit, which simply declares the results of competition sacred and fair because they are the results of competition, has been provided with other theoretical support by the science of economics. According to its theory of national income, everyone receives, with absolute performance equality, exactly what he contributes to the national economy — to the gross national product — with his job as waiter or chancellor, soldier or sailor, professor or politician; he is ‘reimbursed’ for it, as it were. Hence somebody who gets his two thousand a month is getting confirmation what a lightweight he is economically speaking. Twenty thousand per month or per week are likewise confirmation for the person raking it in that not only he would be poorer without his job but also the nation, by precisely this amount.

And how can economists be so sure about this?

Certainly not because they have actually taken stock of the division of labor in the national economy, assessed the importance of all the various functions, and converted this importance into a matching income. Such calculations are not done anywhere, and not ‘virtually’ either; not in payroll offices and not even in economics seminars. If one wanted to attempt such a thing, one would immediately be faced with insoluble difficulties: how should the importance of, say, an electrician, a hairdresser, or a manager be rated? And what sum would be the appropriate one? The most likely result would be that a modern, streamlined factory cannot do without an electrician, or the other wage workers either for that matter, whereas the usefulness of a boss may be doubted; and then the investigation would be broken off, if not before.

When economists self-assuredly equate an individual’s contribution to the national product with his income from it, the source is a very different one: it is the way they calculate. They add up in their national product everything that is paid for goods and services in a year — and this sum is constituted from the outset by all the incomes obtained: the fees for ministers, artists, soldiers, etc., quite directly as prices for their excellent services; the wages and salaries of others and even the profits of the rich as components of commodity prices. Gross national product is essentially added up from the sums that are earned; what a person gets is notched up as his contribution to the total wealth. Nothing easier than reading this equation the other way round, and then it’s obvious that everyone gets what he has contributed. QED.

Unfortunately, anything can be proven this way of course. The same calculation method would equally well ‘justify’ a quarter-million annual salary for a street sweeper and two thousand a month for a head of state if that were what they are actually paid; for then that would be what street sweeping and heading the state contribute to the gross national product. But luckily it doesn’t matter: economic experts don’t need to set the incomes; they already exist. So they can’t do anything wrong with their theory. They are just giving their scientific blessing to exactly the income distribution that’s in place.

And so this science is doing nothing different from any smart person who basically approves of the income differences in a market economy and is quite sure that people must definitely not all be made the same. Of course, nobody would be able to say which amounts or at least which differences would be the appropriate ones for an electrician, a hairdresser, and a manager if these amounts and differences really first had to be arrived at and and deduced as fair. Anyone looking for a fair way of meting out poverty and prosperity would be totally stuck — if the various incomes didn’t already exist and everyone wasn’t accustomed to electricians belonging to such and such a wage group, entrepreneurs being in a class of their own, and hairdressers somewhere in between; all of this, by the way, for economic reasons that have as little to do with fair distribution as the price of paper has to do with a poem. But because the different incomes are there and everyone is used to them, it is supposed to be clear where each job roughly belongs on the income scale — in terms of what is fair! In the end everybody thinks, ‘to each his due,’ without realizing that citing this time-honored nonsense just means consenting to precisely the existing distribution of poverty and prosperity — for no better reason than that: because it exists.

The idea of income equality — anything but a source of income!

No matter how you look at it, the attempt to state a convincing, valid principle underlying the income differences prevailing in a market economy shows only one thing: there is no such principle. Looking for one is a mistake and leads nowhere.

But the idea is indestructible. For one simple reason: it doesn’t have to be realized, i.e., no yardstick has to be set up and then used for inventing a suitable income distribution. Everyone with this idea in mind is assuming the income distribution that exists when he starts talking about the problems with it. Is someone getting too much? Am I getting too little? Is the income hierarchy as a whole all right? Or is there some aspect that should be taken a bit more into account? Should the rich maybe get a little poorer and the poor a little richer? Or would the opposite be preferable? Those asking such questions are not really questioning anything, not even theoretically. They’re not out to know why people earn the amounts they do. They are basically wrangling over only one thing: whether people in general, but above all they themselves, must be satisfied with the money that they and others are getting — satisfied not because it’s enough, but because they see some plausible fairness in the gradations and differences in the money earned. Or whether and to what degree they are entitled to be dissatisfied — not because most people earn too little to live decently on, but because poverty and wealth occasionally hit the wrong person.

It is no different when people step up who want to adjust what everyone earns in the name of the ideal of fair distribution. Giving the rich less money, the poor more: this has practically become the hallmark of leftist opposition and the epitome of their critique of capitalism; and has nothing whatsoever to do with criticizing the capitalist economy. Such suggestions for improvement in the name of fairness are expressly uninterested in the economy, i.e., the objective reasons and systematic necessities that account for why some people are swimming in money while most have too little of the stuff. Even this little bit of theory has always seemed too impractical and out of touch to those leftists out to cure the world’s ills. They are undoubtedly more at home putting their crucial question to the free-market income hierarchy: fair or unfair? For this question stems from an entirely bourgeois principle: the dictate of equality, equal treatment of citizens by the law and the constitutional state. In their feeling for the victims of capitalism and in the spirit of a truly just homeland, leftists have merely taken this principle of the bourgeois state a bit far, expecting even poverty and wealth to fall under the supreme command of a state-decreed equalization of burdens. But this small breach of the bourgeois state’s real list of tasks is not too serious. For leftists allow themselves and their exaggerating to be put back in their system-conforming place in the name of the same principle of fair and equal treatment of all. They, too, embrace the doctrine, ‘To each his due!’ and are willing to see by the conditions that exist how much ‘his due’ is in each case for wage workers and state secretaries, businessmen and parcel couriers. That is why they, too, are opposed to making everyone the same in terms of income; they only find some differences out of place and others too great. And even that is found to be all too unfair by some like-minded people beyond the leftist camp; the same ideals of adequate remuneration for what an individual contributes are likewise good for rejecting demands for a fair redistribution as unfair. And so all the positions are there for wrangling at the highest political level, too, about whether the people are spoiled or do have some right to gripe.

And what is the griping, huffily insisting on the idea of income equality, good for?

It is definitely not good for making more money. This even applies to everyone, both dissatisfied poor people and wealthy people who think it wouldn’t hurt for them to be quite a bit richer. When a businessman complains that competitors have unfair advantages, he still has to beat them and conquer their market. When a mid-level civil servant complains about deferred promotions, he still has to obtain a promotion. When unskilled workers complain about starvation wages, they still have to put some pressure on their employer and impress him. The notion that one has rights and merits on one’s side is no use at all. What matters is the economic resources that someone has in his particular job for improving his situation. This is the ultimate and toughest, namely, practical, refutation of the erroneous belief that earning money is all about getting one’s due.

On the (in-)equation between earning and deserving

Why does a dentist earn what he earns? He himself may be convinced that it’s because of the tricky work he’s so good at. That is not the truth. The reason lies with the organization of the health care system, which pays him fees for his treatments through insurance funds. Why does a football star evade taxes? Because he, too, thinks that the way he exerts himself on the job, he is worth all the money he earns. Wrong again. The reason why a few exceptional players achieve top incomes is that the state likes to be represented by top athletes, a whole industry throws a sports competition as a massive business, and masses of people pay for entrance tickets and fan merchandise to celebrate their local patriotism. With a bus driver, it is again irrelevant how much patience and attentiveness he summons up behind the wheel and that unruly riders brighten his day. What he earns is negotiated between the municipal transit company and his union. And the better paid pilot shows him that a higher income depends on the strength of the union, which in turn hinges on how replaceable the crew in the cockpit are. If someone thinks these are isolated cases that only show that there is, or at least should be, a correlation between the work one does and the money one earns, this is absolutely wrong. In every job you may need to do something to get paid, but the various things you do are never the reason for what you earn. This can be seen by all the occupational groups characteristic of gainful activity in capitalism. A small selection:

a)

Land and building owners must do many a thing for their fine incomes. However, when managing, renting out, building on, buying or selling plots of land and residential or business premises or pursuing their other professional activities, they are not bringing about the amount of money they get. The crucial variables of their business — supply and demand — are determined by a number of circumstances that are beyond their control: first and foremost the overall capital growth coming about, or not, in the region, i.e., in the competition of companies taking place there. Their actions on the housing and property market are speculations on a sufficiently large demand aimed at their private parcel of land rather than those of their competitors. As if this profession wanted to admit they are kidding themselves when priding themselves on their ability to succeed in speculation, their repertoire includes going from trying to charm building officials and big prospects to trying to bribe them, so as to secure the purchase or sale of an attractive site.

The reason that building and land owners can make a business out of the given demand certainly does not lie in their business zeal or prognostic abilities. What they are earning money on is a tangible kind of means. After all, every one of their activities is based on their exclusive ownership of land and whatever is on it, and their freedom to deal with it according to their calculations. This achievement definitely goes beyond their skills. The state does not simply record the existing distribution of land among private persons, as well changes in it through purchases and sales, at its land registry. By guaranteeing property and accordingly assigning property claims, it stipulates that the basis of all production and consumption is a matter of exclusive, free, private disposal. The state guarantee of this relation is what turns the fact that the property owner doesn’t need the land for himself into supply, and society’s need for parcels of land into demand — which accordingly only counts insofar as it is able to pay. When a landowner only has to ask how these two variables look at the moment and in the future and bases his business decisions on that, he is sponging off the state monopoly on force, which appears to him with his biased standpoint sometimes more as a hindrance and other times more as an aid in securing his natural right to his property against trespassers. He is availing himself of a source of income that exists separately from his honorable personality and is granted to him by the state.

If a member of this profession wants to spare himself the hassle of making commercial use of his property, he doesn’t have to forgo an income; at least not necessarily. If his ownership of a delimited part of the general basis for life and business is large and attractive enough, he can hire an estate manager to do good business with it for a share in the earnings. This, too, is a little indication that a building or land owner does have to do something to earn his income, but the source of it is actually the politico-economic power of owning a piece of land that he doesn’t need while others do.

b)

Farmers who themselves own a few acres of land put the rule to the test. Likewise recorded in the land registry, they are basically considered landowners just the same as an earl on an estate. Moreover, they work their land themselves with their own hands. But that does not give them two sources of income. They can’t take advantage of others’ need and ability to pay for their land because they need it as the basis for producing agricultural products. A farmer’s labor on his soil is his sole source of income. What he gets for this labor depends neither on his adeptness in performing it nor on its duration. Rising early and applying his knowledge and skills is nothing less but also nothing more than the necessary condition for an income to be obtained on the produce sold. The sufficient conditions he can’t fulfill of his own accord. The least of these are fertility of the soil, proximity to sales markets, prices to be paid for his equipment, seeds and other means of production, as well as the prices he gets for his produce from cooperatives and other trading capital; none of that is under his control. So often enough, his own land proves to be a ball and chain when he is trying to make an income from cultivating it. Finally, political resolutions in Brussels or Washington on granting or doing away with subsidies impact how effectively he can earn money through his labor.

c)

In a start-up garage, some technical innovation or other may be developed. But in order to obtain an income with it, its enterprising inventor has to acquire a patent to it. What matters here is the exclusive right of disposal — as many a patent applicant who is too late can testify to. But it is not enough to keep to the motto ‘better first than best’ either: a start-up can pack up and go home no matter how useful its innovation is, and even if it is patented, if there is no ‘angel’ to invest venture capital in it. Only that will turn an innovative patent into a means of business. The brilliant stroke of genius praised later is nothing without the success of the risk capital that has recognized a vehicle for its growth in the blueprint and business plan, and made use of it. Depending on how useful the invention is for accumulating that capital, the inventor either advances to company manager, or his search for the ‘next big thing’ has been useless because there aren’t enough financial resources to ‘take off.’

d)

Others have been running a company for some time and are even known as “the industry.” Managers earn a lot of money working to the point of exhaustion making decisions about employees and the company’s wealth. If you ask them or a sympathetic fellow citizen, this is a burden known as responsibility. So their income is morally acceptable. No one is particularly interested in the actual reason why responsibility for people and wealth, i.e., making decisions about them, brings in an excellent income. An executive at the top of the company hierarchy has at his disposal all the material resources in offices or production shops for having a salable product produced whose sale makes the firm grow. All of which would be worthless, of course, if he weren’t also in charge of a crew of employees who carry all that out. The authority to decide how fast this crew works, how many of them count as worthwhile costs and how many must be done away with, etc., in order to improve the company’s earnings statement turns its inventory into a productive affair. Ironically enough, this command relation is considered a burden on the commander so sorely weighed down by his responsibility. What is being brought to bear is not the boss’s steadfastness or some other character trait that he takes pride in as his means of success, but rather the capital invested in the firm, which determines the earning potential of the wage-dependent staff. The manager executes the power that this capital puts in his hands, and that is the reason for his income.

How far he gets with this task and how much he accordingly earns is not a consequence of his “work” either. In his attempt to put the economic power of property to use for the company, he is in competition with his peers. He may have groomed the company for success with enormous drive and passion — how he fares in competition only comes to light afterwards. If the firm goes into bankruptcy, the reward for his top-notch efforts might well be a heart attack.

Unless of course one belongs to that part of the capitalist class that leaves the burden of responsibility to others for a share in the profit. Then one is a man of private means who only has to collect the proceeds from the use of his property. The mere title of ownership to a firm allows him to have capital grow under the direction of others without the burden of commanding, and to derive his income from it. That, too, makes a mockery of the notion that entrepreneurial efforts bring about the income of a manager or the family owning a business. Since the ownership of capital is separable from its function, some representatives of industry earn their money by running their own company, others by managing someone else’s firm, and yet others by getting richer through the mere title of ownership to a firm.

e)

Someone owning no property has, for example, the option of applying for the civil service. It’s not what it used to be. There’s more work to be done for less pay than in the old days. But one thing has definitely stayed the same: in the civil service one is a service provider for the public. As such, the civil servant lands in an elaborate hierarchy that the employer fits him into. The state as law-giver organizes this hierarchy according to two different criteria (German practice discussed below, but the principles hold generally):

— Its tenured officials also bear responsibility. In their case, however, this is not a euphemism for utilizing state-protected property rights for private enrichment. Here it means defining, supervising and enforcing such rights; a business that produces not money but rather restrictions and freedoms for third parties. The state gives its servants tenured-official status when they exercise governmental power, and provides them with a fixed salary.1 They are supposed to be able to perform their duties properly, and that means acting only in accordance with state principles in an unbribable and respectable way before those they give their directives to — from normal people up to the leaders of industry. Hence, the more power a post involves, the more importance the state attaches to a high salary. It uses its financial support to more or less bribe its top officials in advance.

— For the lower ranks the state applies a different criterion. When the servant’s function has little or nothing to do with exercising state sovereignty, the crucial aspect is that such staff are cost factors. So the public employer embraces the same calculations for its pay-scale employees that ordinary employers apply to their staff.

f)

The vast majority of people earn their money as normal workers and employees in factories and offices according to performance in the quite banal sense: the longer or the more output per unit of time, the higher the amount they earn. And the other way around. So here things are fair. Only, the pay calculation in this sphere is based on all individual working hours or above-average output per unit of time having first been assigned a certain wage. And where does that come from? The assignment of one to the other is fixed with the creation and staffing of workplaces. And it brings to bear, in its way, the two antagonistic interests entering into an employment relationship with each other. On one side, employees are out to earn a livelihood by their work effort in a company. The amount of pay and the extent to which they are drained by their work are crucial for their quality of life. On the other side, employers are interested in maximum effort at the workplace along with a minimum of pay. What matters to them is the difference between the advance they have invested for producing salable goods and services on the one hand, and the money surplus achieved by selling these goods and services on the other hand. The profit, which is what they only create jobs for in the first place, increases with the cheapness and the yield of the labor they employ. It is no secret which of the opposing interests gets its way in the assignment of pay to performance. Employers definitely get their money’s worth, creating jobs or not according to their business prospects. Those dependent on wages have to look for jobs, make themselves into an offer for employers, and agree to the profitable relation of pay and performance at the workplace, if they want to meet their living expenses. That's why some of them feel compelled to do not only their own job but also that of a trade union member. They join together with their peers to form an opposing power in order for their interest in a livelihood to be taken into account at all in the relation between pay and performance, and for their service for profit to allow them to make a living. So how much money, if any, some work performance is worth is determined between companies and unions in a very one-sided power struggle, on the premise of a sufficient profit, if not directly by the company alone.

When trade unions are allowed and able to participate in determining pay and performance, they reach a consensus with management on a whole hierarchy of wages and salaries supposedly corresponding to the respective performance. According to their interest in profitable labor employment, employers pay low wages for the mass of workers and tiered higher incomes for their supervisors and controllers, justifying this sorting by higher or lower performance. The union, on the other hand, is concerned with making this very hierarchy genuinely fair and removing it from the ‘arbitrariness’ of the factory owners. The union follows the payment criteria of the opposing side and objectifies them into a system of wage differentiation by using a catalog of performance features and corresponding pay elements to define its clientele's various concrete tasks into some total performance having more or less money value.2 At the same time, one can’t help but notice that even this constructive concern has to be asserted against the other side, whose interest in business is superior to that in a livelihood, so that it is the one to decide which relation between pay and performance is fair in the only way that really counts.

*

So when gainfully employed citizens think they and their work are the reason for their income, they are sadly mistaken. The relation between gainful employment and the amount of money earned is determined by standards that one difference is evidently crucial for. Some have means that are good for putting others to work — capital or a portion of state power. The others are means for the purposes of the former and have to see if they can cope with the drain on their strength and make ends meet financially. That is the banal basis on which all money is earned — and which gives rises to a whole politico-economic system.

Notes

1 “The so-called reservation clause for function stipulates that anyone exercising governmental authority as his regular task must be routinely appointed to a tenured-official position, Article 33.4 Basic Law of Germany” (German Civil Service Federation, www.dbb.de)

2 More on this peculiar concern of trade unions can be found in our article, “‘Entgeltrahmenabkommen’ (ERA) – ein neuer Manteltarifvertrag für die Metallindustrie: Lohngerechtigkeit heute” [“‘Remuneration Framework Agreement’ – A new collective wage agreement for the metal industry: Pay equity today”] in GegenStandpunkt 3-08. (untranslated)