2011 January 03 Monday
Selfish People Take Lower Paying Jobs

See how the higher income people pay far more in taxes. This suggests an obvious solution to the government financing crisis. Anyone see what it is?

In 2005, the richest 13.5% of California taxpayers (or those earning more than $100,000) paid 83% of all income taxes. Capital gains from the top 5% of taxpayers accounted for $100 billion out of the $111 billion in total capital gains reported.

?Those revenues rise and fall dramatically with the stock market, resulting in California?s unstable and volatile revenue stream,? the state Controller wrote.

After careful consideration of Reihan Salam's first post on "Threshold Earners" (people who stop working so hard because they have enough money) and his comment about fellow elite university grads (he's a Harvard alum) who choose occupations that do not maximize their earning potential or wealth generation capacity I began to see a deep problem in American society which I had previously missed.

Why is America no longer doing as well as it should? Why have wages for the lower classes stagnated for decades? Many of the potential big income earners, company builders, and potentially excessively high taxpayers are shirking their duties. All those non-profit organization directors with MBAs from Harvard who lecture us about what we ought to do about Africa, medically uninsured mothers, and countless other causes are failing to pay their share of taxes. When Marx said "from each according to his ability" (or was it Lenin?) what did these Ivy Leaguers think he was talking about? Running an NGO? Nope. Profit, profit, capitalistic profit.

What can we do about this problem? People choose higher paying jobs in part to get better working conditions. This suggests an obvious solution to our massive government deficits and looming unfunded entitlements disaster: Make lower salary jobs so unpleasant that people will be forced into higher paying jobs that generate more tax revenue. Why hasn't anyone else thought of this idea?

And another thing: "Threshold earners" are increasing income inequality by making the upper class much too small. If they went for making far more money then the upper class would become so big it'd become the middle class.

Next time you hear someone morally posture as superior because they are a teacher or a writer or an NGO fund raiser refuse to grant them the moral high ground. Lecture them right back and demand they stop hurting our society with their selfish career choices that generate no wealth. If they went into the private sector and earned big bucks starting companies and leading existing companies to greater success their spending and job creation would skyrocket and the unemployment rate for our poorest sectors of society would plummet. Costs of government social programs would plummet while government tax revenues would surge.

This might sound like biting social commentary and sarcastic barbs at our intellectual elite. But it has the added virtue of being true.

Update: The lower paying jobs I am referring to are managers at do-gooder foundations, NGOs, the United Nations (maybe not so low paid), theater directors, and other jobs that require lots of brains but do not pay well. The problem we have is that lots of smart Ivy Leaguers pass up on the opportunity to make more money and do more useful work as engineers, engineering managers, pharmaceutical lab managers, and other occupations key to the most wealth-producing parts of the economy.

If you have an Ivy or even second tier college degree and you are, say, director or fund raiser for a museum or librarian at some college or city library you are basically dodging the most productive sectors of the economy. This selfish choice of careers has two negative impacts on the rest of society:

  • Smart avoiders of high wage occupations pay less in taxes, thereby increasing the burdens on the people in the most productive sectors of the economy. Likely these smart avoiders also vote for higher taxes on those who choose more productive careers, all the while morally preening as superior.
  • Smart avoiders also do not start up the new companies and create the new industries needed to provide jobs for the less able.

Smart avoiders (smart shirkers? that sounds even better) mostly pose as morally superior SWPLs. But let us call them what they really are: massively callously selfish. Their pursuit of psychic income (pleasurable intellectual work in low stress occupations) enables them to evade real taxes on real income and reduces their contributions to the rest of society.

Dennis Mangan points to a NY Times article on Europeans who educated themselves in parasitic subjects and then found there aren't enough jobs available for parasites.

?They call us the lost generation,? said Coral Herrera Gómez, 33, who has a Ph.D. in humanities but still lives with her parents in Madrid because she cannot find steady work. ?I?m not young,? she added over coffee recently, ?but I?m not an adult with a job, either.?

She can not find steady work teaching humanities. The government isn't taxing the more productive enough to subsidize the smart shirkers. The NY Times article describes people who have trained to be government bureaucrats who can't get any smart shirker jobs. I say great news! Europe needs large cut-backs in shirker jobs to force people into less shirky jobs.

Dennis Mangan thinks the era of easy jobs is over.

See, these young people thought they could get degrees in easy subjects, ones that required of them no math or science, no finance or engineering or technology courses, and then they could just cruise through life with a government job and retire at age 55 or whatever. Those days are over, just as they shortly will be in the states.

I am not so optimistic. Governments will shrink, but not nearly enough. Plus, foundations and NGOs (non-governmental organizations), and quite a few other pockets of jobs for the self indulgent will survive. Those who work in the most productive jobs will have to keep carrying not just the less able but also the too large ranks of the less willing.

By Randall Parker at 2011 January 03 12:19 AM  Economics Inequality

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Comments
Aki_Izayoi said at January 3, 2011 4:24 AM:

"What can we do about this problem? People choose higher paying jobs in part to get better working conditions. This suggests an obvious solution to our massive government deficits and looming unfunded entitlements disaster: Make lower salary jobs so unpleasant that people will be forced into higher paying jobs that generate more tax revenue. Why hasn't anyone else thought of this idea?"

Because it is a stupid idea! In general, aren't low salary jobs, such as janitorial work or waitressing, already unpleasant because of the lack of prestige in those positions and the people who are employed in those jobs do not have any other options.

Come on Randall! You're smarter than that!!

But I suppose you are talking about high IQ people who have low salary jobs... or maybe they should try the academic track -- try to be tenured professor; at least they would assist a principal investigator in pushing the boundaries of current scientific knowledge as they are a grad student or post-doc (which are rather low-paying relative to other options that high IQ people have although the prestige is much higher than working at fast food restaurant)

Aki_Izayoi said at January 3, 2011 4:24 AM:

"What can we do about this problem? People choose higher paying jobs in part to get better working conditions. This suggests an obvious solution to our massive government deficits and looming unfunded entitlements disaster: Make lower salary jobs so unpleasant that people will be forced into higher paying jobs that generate more tax revenue. Why hasn't anyone else thought of this idea?"

Because it is a stupid idea! In general, aren't low salary jobs, such as janitorial work or waitressing, already unpleasant because of the lack of prestige in those positions and the people who are employed in those jobs do not have any other options.

Come on Randall! You're smarter than that!!

But I suppose you are talking about high IQ people who have low salary jobs... or maybe they should try the academic track -- try to be tenured professor; at least they would assist a principal investigator in pushing the boundaries of current scientific knowledge as they are a grad student or post-doc (which are rather low-paying relative to other options that high IQ people have although the prestige is much higher than working at fast food restaurant)

Aki_Izayoi said at January 3, 2011 4:27 AM:

Sorry, Randall:

Maybe I'm the retarded one... perhaps you were being sarcastic or attempting satire.

Engineer-Poet said at January 3, 2011 8:04 AM:

There was a twitch on your sarcasm detector, but it should have been pegged.  Hope it's still under warranty.

jerry said at January 3, 2011 10:37 AM:

"Make lower salary jobs so unpleasant that people will be forced into higher paying jobs that generate more tax revenue. Why hasn't anyone else thought of this idea?"

They have! That's why they're importing millions of third worlders and have housing discrimination laws and Section 8. Of course this only really applies to the white middle class and below, but maybe we can pass a law that forces the staff of every organization below the top 1% of money makers (and the neighborhoods their executives live in) to be 1/3 black and brown. I'm sure Lakeesha and Juan would be glad to take the positions at half the salary. And it would introduce to the members of the affected groups the same wonderful economic motivating tool that has caused tens of millions of white middle class and below over the last 50 years to work so much harder in order to purchase houses they really can't afford, thereby tremendously boosting the economy.

no i don't said at January 3, 2011 10:56 AM:

In the United States of America, people work like slaves on plantations. If you do not happen to be a property owner, all you will have to do is either to survive working in the service industry or playing the game of musical chairs for a cubicle (which will be outsourced to India some time next week anyway).
The best thing which you can hope for in the USA is to receive a professional's degree and milk the system for a piece of middle class pie. Even those who make it in the middle class stay just one disease or job loss away from poverty. Your jobs are not protected. Your company is not loyal to you. They will set you against your own colleagues at work, if they need to, and then they will get rid of you. It goes without saying that you do not have a choice at this point: this is the way this system works.

In many developed countries, a higher education is either free or subsidized. In the United States, getting a university degree will give you a debt of over $100,000. You are destined to step into the working world with a massive burden of debt on your shoulders. Forget about having a journey around the world or finding yourself - you have to start working. Otherwise, you will have to watch your credit rating rolling down the hill.
If you are one of the lucky guys, you can find a job that will be good enough to get you a home loan. Afterwards, you will have to spend a half of your life to pay the interest on the loan - welcome to the world of American debt slavery.

Most of your beef that you consume in the USA, has been exposed to fecal matter in processing. Your poultry is infected with salmonella. Your stock animals and poultry are drugged with hormones and antibiotics. In most countries, governments would try to protect their citizens against all this, but in the United States the government is bribed by industrialists to avoid regulations and inspections.

In a few years, the majority of all the produce for sale in the United States will be from genetically modified crops, thanks to the cozy relationship between Monsanto Corporation and the United States government. Worse still, due to the vast quantities of high-fructose corn syrup Americans consume, fully one-third of children born in the United States today will be diagnosed with Type 2 diabetes at some point in their lives.

Black Death said at January 3, 2011 12:26 PM:

"See how the higher income people pay far more in taxes. This suggests an obvious solution to the government financing crisis. Anyone see what it is?"

....

I thought it was to create more higher income people.

mike said at January 3, 2011 1:21 PM:

Good post, Randall. These people would argue that their in-kind contributions are worth more than the taxes they would pay in a profit-maximizing job. However, this amounts to a concession that government taxes are an inefficient way to allocate resources.

Sam said at January 3, 2011 1:49 PM:

We seem to be in a vicious cycle in the US. The manufacturers move manufacturing overseas, strip mining the technological base. The financial people use financial engineering to bet on ever riskier and more leveraged ways to create profits. The Government borrows ever more money. I'm really scared. I mean really scared. I can't sleep at night sometimes. The only idea I've been able to come up with is to make all companies that sell products not made in the US to have all executive compensation not more than 20 times the pay of their average worker at the company. Similar to Europe and compensation in the 50's. At least then they would feel the pain of their actions immediately instead of 10 years from now. For financial companies outlaw most of what they are doing. If it's not generally raising capital for production. Don't allow it. No futures, no derivatives. What's worse, I know these are not even very good ideas. If we allow things to go on as they are the average workers salary will be that of China. The Libertarian position would be this is a good thing and that the high wages of our CEO's are just. I don't believe that. Any fool can sell the technological base your company uses to manufacture goods. We could pay CEO's peanuts to sell off the infrastructure. I think it very rare that a CEO is so gifted that he's worth what American firms pay. Maybe there are some but I'm not aware of them. Mostly the people in Gov. and those who run our economy are in the same clic. If you are looking long term their actions seem incompetent to me. How do we control their pay at the level we believe they are worth? You can't opt out without extreme measures. This is going to end in a disaster.

bbartlog said at January 3, 2011 3:57 PM:

I'm a threshold worker. I used to have a $75K software job. Now I raise chickens and am in the process of taking up other farming; I imagine I might make $25K in 2012 after making nothing in 2011. I could likely get another software job instead (though possibly not for $75K, unless I were willing to move). But I choose not to.

As for the income tax implications:
- first of all, the federal government has decided it's OK to print money rather than finance their spending with taxes.
- second of all, the personal income tax has never been a really huge component of federal revenue
- most importantly, while I have never been particularly loyal to the government, I lost any remaining sense of obligation when they bailed out the banks for however many hundreds of billions in losses. Previously I was at least willing to play by the rules; now I will game the system whenever I can.

Anyway, besides arguing for high-paying jobs as way of people maximizing their financial contribution to society, you seem to be saying that the higher paying jobs also imply that these people must be doing more useful and productive work than they are when they take lower paying jobs. That's some hard core libertarian thinking, there! But I think it is not very close to true, and it is becoming less true over time. Too much of obtaining a high salary or great wealth depends on winning zero-sum games, or achieving cartel pricing power, or being perceived as the right kind of person to join the social group at some company, or using information asymmetry to your advantage. There certainly are jobs where your returns are going to closely reflect the value you can deliver; for example if you run a diner, or grow corn(*). But those are not representative of high-paying jobs in general, though I grant that it is possible to make a fair bit of money at either.

(*) - actually most people that make a lot of money growing corn probably game the US farm subsidy system, these days.


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