Robert Reich on the “Paid-What-You’re-Worth” Myth

Robert Reich, an economist and former Secretary of Labor under the Clinton administration, has a post about why “paid-what-you’re-worth” is a dangerous myth. Do low-wage workers who earn minimum wage get paid what they’re worth? Are CEOs of big companies worth their big compensation packages?

Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour.

Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive.

The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.

Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own.

As for executive compensation, Reich points out that CEOs help appoint the compensation committees on their boards who decide what that compensation should be. He also points out that Wall Street bonuses have been subsidized by bailout money, and that Wall Street also uses its money to donate to political campaigns and win favors. In comparison, low-wage workers, as Reich puts it, “don’t have privileged positions,” though they work hard and are a critical part of our economy.

Photo: Walmart

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