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Wage Myths

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Jake Rosenfeld has a useful list of myths told about wages and other forms of compensation that serve to undermine workers ability to fight for more.

The vast majority of U.S. workers say the quality of their work is the No. 1 factor determining their pay. In 2018, in collaboration with the survey research firm Qualtrics, I administered a survey to approximately 1,100 employees age 18 and above (representative of the full-time workforce). I presented respondents with a number of factors that might influence pay, including seniority, experience, education and individual performance. Two-thirds of the workers said individual performance was a very important determinant of pay — a far higher percentage than for any other factor — and another 19 percent said it was somewhat important. Some scholars, including the George Mason University economist Tyler Cowen, even suggest that improvements in measuring individual performance help explain rising inequality.

But most of us are not paid based on our individual performance, and the small fraction who are has declined over time. (Research finds that the number of jobs with performance-related pay structures peaked in the early 2000s and then began to fall.) Factoring out workers who receive bonuses unrelated to individual performance (such as bonuses for company performance), economists Maury Gittleman and Brooks Pierce find that less than a fifth of hours worked in the United States are in jobs offering individual performance-related pay. A separate survey I collaborated on in 2017 of more than 2,500 workers found that only 1 in 10 received payments based on individual performance. Even among workers whose pay is partly tied to measures of individual productivity, performance usually accounts for a small share of their earnings — 10 percent or less, according to one study.

Tyler Cowen is such a hack. Just a complete bought and sold hack.

Here’s another, on fast food work:

“Fast food,” says an article on Yahoo Finance, “also happens to be cheap food so there is very little wiggle room” for managers to raise pay. Similarly, a CNBC story cautions that for fast-food restaurants, “minimum wage hikes usually mean higher menu prices and fewer employee hours.” In other words, paying fryers and burger flippers more means either significantly higher prices or far fewer of these jobs.

Yet your average Danish fast-food worker makes far more than her U.S. counterpart — even though there is nothing different about working at a Burger King in Denmark vs. one in, say, Denver. Danish outlets feature products recognizable to any customer of the company’s U.S. locations, with the exception of a burger that substitutes fried halloumi cheese for the beef patty. No advanced training is required to produce one, as far as I can tell. In a 2014 New York Times article, one Burger King employee in Copenhagen — who, at the time, earned nearly three times the federal minimum wage in the United States — put it succinctly: “You can make a decent living here in fast food.”   

How do Danish fast-food outlets survive with such high wage bills? Turnover is lower. In the Copenhagen airport’s fast-food restaurants, more than two-thirds of employees stay on for more than a year, according to the firm that runs them. By contrast, turnover rates for U.S. fast-food restaurants reached 133 percent in 2017.  Saving on training and search helps Danish companies absorb some of the higher pay they dole out to employees. Oh, yes: Prices are a bit higher; one estimate suggests that a Big Mac at a Danish McDonald’s costs a whopping 27 cents more than in the United States.

There are so many myths about work that hurt us. Among them is that we aren’t supposed to talk about how much money we make. That’s actually a conversation we absolutely should be having with everyone else in our workplace. One good thing about being a public sector worker is that your salary is a matter of public record.

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