Quote:
Originally Posted by DonQuigleone
I think the reason that managers earn more is that they're the ones that set the wages...
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I'm going to go with don here for the most practical best answer. If I remember my microeconomics correctly, there are a couple of justifications for why managers (should) earn more.
The first has to do with the fact that there's something of a fundamental gap between opinion of the wage-earner and wage-setter on whats the right wage. first (for arguments sake) i'm taking a look at wage in a broad(er) manner, including the prestige, responsibility etc. ( of course, this would imply that certain jobs attract certain types of people based on what they want out of a job). Unless both the employer and employee know that they both know exactly how good the employee is, there'll be some kind of gap between what people earn and what they think they should earn. If the employee thinks hes earning less than he should for the work he does, he'll shirk, and by shirk i mean he might work less hard, work less hours, steal money, w/e. Since finding that information out beforehand is impossible (or lets say, prohibitively expensive), you gotta enforce the rules within the organization post hiring. But then the same problem arises; how do you enforce the enforcers? Obviously, by increasing the severity of consequences, but more importantly, by linking the managers wage to the overall size, and profits of the company. The regular employees on the other hand, are paid according to the 'output' they produce. This problem is confounded for government jobs; there's no profit to peg wages, and there is at best a set of fluid goals to use as benchmarks. That was a bit of a tangent, but anyways since the management has the power to set the wages, this is one of the more popular justifications, at least in standard economic academia. Theres a lot of brain-frying stuff on corporate management models that I have little no expertise in however.. its explained a lot better in the original article, so pm me if you want to read it
The other reason is
often has to do with the lifetime of an employee in a firm; by paying managerial 'senior' positions higher, you increase the incentive of employees to remain and work harder to reach higher positions. Even if its only an illusion that there is that amount of vertical mobility for employees in an organization. This is all excluding the argument that managers do more for the company in terms of profitability, hence they should be paid more (its quite a weak argument)
*Sigh* I guess I respect economics point of view that by modeling individuals behavior under somewhat restrictive assumptions we can extract meaning and results that otherwise wouldn't be apparent. Unfortunately, this injustice ( i guess you could call it that.. though feel free to put in any word you like) is the consequence of following a (restrictive) system based purely on mathematical selfishness, a.k.a economic effciency. Despite our best efforts, the way we are now doesn't look particularly efficient in the economic sense either.