Do you think you can evaluate the productivity of a group of people by looking at their combined $ output? There is this measure called GDP that does that and it is pretty popular.
I think that $ output should be the starting point of evaluating productivity and adjustments from that point should require some justification. Salary is not the same as $ output but it should be roughly proportional. People can’t really be paid 100% of their output, so maybe on average salary is like 50% of $ output, and for some people it is only 25% and for some people it is 75%. That already creates a lot of potential error, but again there needs to be some reason to believe that a person is overpaid or underpaid relative to their $ output.
Do you think you can evaluate the productivity of a group of people by looking at their combined $ output? There is this measure called GDP that does that and it is pretty popular.
But also extremely bad as a measure of wealth generation. The economists who came up with the concept in the first place basically said “by no means should this be used as a measure of wealth generation,” but then we went and did it anyway for lack of an obviously better measure.
As for the relation of salary to productivity, an incompetent CEO who runs their company into the ground (and thus has a negative wealth output) can make orders of magnitude more money than, say, a highly productive academic. Salary is not a good proxy either for the usefulness of the work one produces or the amount of time and effort one spends being productive (the hardest and longest working people in the country are often among the worst paid.)
I would characterize GDP as “obviously wrong” as a measure of actual productivity.
That being said, one good reason to assume that someone is underpaid relative to their output is that they work in the nonprofit sector, where salaries are typically lower for equivalent levels of work.
Do you think you can evaluate the productivity of a group of people by looking at their combined $ output? There is this measure called GDP that does that and it is pretty popular.
I think that $ output should be the starting point of evaluating productivity and adjustments from that point should require some justification. Salary is not the same as $ output but it should be roughly proportional. People can’t really be paid 100% of their output, so maybe on average salary is like 50% of $ output, and for some people it is only 25% and for some people it is 75%. That already creates a lot of potential error, but again there needs to be some reason to believe that a person is overpaid or underpaid relative to their $ output.
But also extremely bad as a measure of wealth generation. The economists who came up with the concept in the first place basically said “by no means should this be used as a measure of wealth generation,” but then we went and did it anyway for lack of an obviously better measure.
As for the relation of salary to productivity, an incompetent CEO who runs their company into the ground (and thus has a negative wealth output) can make orders of magnitude more money than, say, a highly productive academic. Salary is not a good proxy either for the usefulness of the work one produces or the amount of time and effort one spends being productive (the hardest and longest working people in the country are often among the worst paid.)
I would characterize GDP as “obviously wrong” as a measure of actual productivity.
That being said, one good reason to assume that someone is underpaid relative to their output is that they work in the nonprofit sector, where salaries are typically lower for equivalent levels of work.