Are you earning a fair day's pay for a fair day's work?

Updated / Monday, 19 Feb 2018 13:26

The countdown is on

By Professor Kevin Murphy

Opinion: why are pay levels higher in some jobs than in others - or are similar in jobs that seem very different in terms of their requirements?

Are you being paid fairly? A recent large-scale survey of employees suggested that fewer than one quarter of employees are very satisfied with their overall level of compensation. There are many reasons why employees might be dissatisfied with their pay. One recurring theme is the concern that jobs that seem in many ways similar sometimes end up with very different levels of pay, while jobs that appear to involve quite different levels of skill end up with similar pay scales. 

For example, the average salary for registered nurses in Ireland (€30,839) is almost identical to the average salary for clerical assistants in An Garda Siochana (€30,800). Depending on your perspective, this might seem entirely reasonable or grossly unfair.

Why are pay levels higher in some jobs than in others, or are similar in jobs that seem very different in terms of their requirements? It all comes down to three factors: (1) the market, (3) the characteristics of the jobs themselves and (3) the dead hand of history. It is this last factor, historical preferences and biases, that often fuels perceptions of unfair pay.

"The belief that the market defines how much different jobs are worth is troublesome for a number of reasons"

The market

The answer to why some jobs pay better than others is often "this is what the market will bear" and there is considerable wisdom in this approach. After all, if it is impossible to recruit nurses with a salary of €20,000, but entirely possible to fill this job at €30,000, it is hard to argue with the idea that the job is really only worth €20,000. 

Taken to its extreme, the idea that the market determines the worth of jobs implies that the whole idea of unfair pay scales must be wrong, because this approach defines the worth of a job by the prevailing wage rate. Reports that the top bullfighter in Spain makes approximately 60 times as much as the President of Spain (€5m versus €82,000) are taken by some people to mean that he is worth 60 times as much.

Where the dead hand of history has proved most troublesome in discussions of pay fairness is the belief that work performed by men is more valuable than work performed by women

The belief that the market defines how much different jobs are worth is troublesome for a number of reasons. First, this belief is an extension of the efficient markets hypothesis, the idea that markets have all the information required to accurately determine prices and value. This was once a dominant idea in economics, but has long lost its appeal. Markets tell what people do pay for goods and services, not what they should pay.

Job characteristics

An alternative is to set pay levels in relations to characteristics of the job such as the skills and knowledge the job requires, the responsibility and complexity of the job, the consequences of errors, the requirement to work under difficult or stressful conditions and the like. These types of "compensable factors" form the basis for many compensation schemes, and they present a seemingly objective method of determining the pay levels appropriate for different jobs. 

Of course, there are questions such as why some aspects of work are treated as compensable (such as level of responsibility), while others are not (for example, providing personal care to others). But an analysis based on the characteristics of the job itself at least provides a rational answer to why some jobs are paid higher than others and why some jobs that seem to have very different contents nevertheless receive similar levels of pay.

The principle that companies should pay men and women the same pay for doing the same work is enshrined in the law of most industrialised countries. Analyses of pay on the basis of job characteristics led to the concept of "comparable worth" – i.e., that jobs that are of equal value (based on their compensable factors) should receive equal pay. Comparable worth has turned out to be a tricky concept in law, especially when jobs that have similar levels on compensable factors end up receiving different levels of pay in the marketplace, but this idea has sometimes been incorporated into pay negotiations.

An equal pay protest in London in 1976. Photo: Getty Images

History and tradition 

The idea that some types of work are more valuable than others arguably reflects a very old set of ideas about how some types of people are more valuable than others. There is the long-standing idea that a "gentleman does not work with his hands"; the extension of this idea is that a nobleman does not work period. 

Going back to the Middle Ages, the work a person performed determined his or her station in life. Manual work was reserved for the lowest classes, with the nobility living on the rents they collected rather than on the work they did. It is no coincidence that you still pay your rent check to your landlord, and it is also no coincidence that manual labour, even highly skilled manual labour, like the work of a master carpenter, is still viewed as less valuable than work that is primarily mental (e.g. managers and executives).

By the end of the first World War, the job of secretary was held mainly by women and the pay, prospects for advancement and prestige had plummeted. 

Where the dead hand of history has proved most troublesome in discussions of pay fairness is the belief, once widely accepted, that work performed by men is more valuable than work performed by women. Thus, the finding that an elementary school teachers’ annual salary (€23,000) is lower than that of construction labourers (€25,000) comes as little surprise. The salaries of male nurses are typically higher than those of female nurses.

The most compelling example of this bias in my mind comes from a job that was once male-dominated, but switched to being "pink-collar work".  Prior to 1900, the job of secretary was prestigious and well paid. By the end of the first World War, the job of secretary was held mainly by women and the pay, prospects for advancement and prestige had plummeted. 

From RTÉ Radio One's Today With Sean O'Rourke, a discussion on the gender pay gap with Emily Logan, Irish Human Rights and Equality Commission' Kara McGann, IBEC and Sonya Lennon, founder of Dress for Success

There are many explanations for the gender pay gap such as differences in choice of occupation and family responsibilities. However, it is clear that part of the explanation for the persistent differences in the pay received by men and women is not explained by the jobs or employment trends, but rather by the belief that men and their contributions to the workplace are simply more valuable than women and their contributions. 

Will we ever reach a state where most people believe they are being paid fairly? It is hard to be optimistic, especially given the surprising sustainability of ideas that have a continuing impact (for instance, that some classes of people are inherently better than and more valuable than others), even though they have a decreasing number of adherents. Change is possible, but it is rarely fast.

The long and the short of it? If you believe you are not being paid fairly, you may very well be right - but determining the level of pay that is ‘fair" has turned out to a significant challenge.


The views expressed here are those of the author and do not represent or reflect the views of RTÉ