To some, this seems unfair. They argue that people should get the same salary regardless of what they do because all work is important. If it wasn't for the blue-collar fans who come to the baseball games the baseball players wouldn't have a job and if it wasn't for the working class who go to the movies, there would be no need for actors. Therefore, they argue, since everyone must play their part to make our economy work, everyone should be paid the same. Today, some are even going so far as to say that the "rich" are stealing the money that rightly belongs to the workers and have equated workers as being slaves to their employers. But such an argument misunderstands why people go to see major league ballgames much more than they do minor league games or why some movies are more popular than others.
A major league baseball player makes more money than someone in the minor leagues because they are more skillful at their profession than others and the same holds true of those who act in movies, or anyone else who works for a living. Whether its doctors, lawyers, salesmen, painters, carpet layers, or factory workers, people get paid according to their skills. The more capable they are at performing their duties, the more money they are apt to be given.
The reason why employers are willing to pay more money to some people than to others is because those people are more valuable to them. For example, the game of baseball performed on a neighborhood sandlot is played just for fun, but a game of baseball played by the major league teams is for the purpose of making money. The better the team is at playing the game, the more money the team owners make. Thus, the better a person is at playing ball, the more valuable they are to the team's owner and the more money those owners are willing to pay to attract and keep the best players.
The same is true of actors. The more an actor can draw people to their movies, the more money the filmmakers make. Thus, the better a person is at acting, the more valuable they are to the producers of the movie. Therefore, the producers feel it is an investment to pay a good actor to star in their movie. And the same principle is true in all other businesses. The reason why one doctor makes more money than another is because of their medical skills. The more accomplished a doctor is at treating the sick, the more valuable they are to their patients. And this same principle applies to any other profession or work where people earn their money through their performance.
However, when someone loses their skills they also lose their ability to maintain their current salary. And the way people lose their value is by not performing their duties to the expectations of those who pay them, such as when an actor no longer draws large crowds of people to the theater. When that happens, producers are no longer willing to pay them large sums of money. Thus, our earning power is directly linked to the value which others place on us.
There are some who question the fairness of doing things this way but it would be unfair to reward people equally for performing unequal work. Furthermore, if the level of our abilities didn't matter and everyone received the same wages regardless of how they performed their duties, there would be no incentive for people to develop and expand their skills. Should that happen, productivity would decrease, ingenuity would be stifled, and the economy would stagnate or fall. Therefore, rewarding people according to their abilities is not only fair, but wise.
However, there is also another facet of earning money that is interwoven into the concept of value and that is the pressure to remain valuable. The more valuable a person is, the greater the pressure they're under to maintain their value. As an example, while a major league baseball player may get a large salary, he is also under pressure to constantly perform well. When his skills begin to diminish to a point where he is no longer able to play well, the team owner will get rid of him. And this same principle applies in other fields of endeavor as well.
At the lower end of the pay scale are the workers who receive an hourly wage for doing certain, routine tasks. In order for them to keep their job, they are under pressure to perform their duties according to company standards. This pressure may simply include such basic things as arriving at work on time and properly accomplishing their appointed tasks but when they demonstrate they have the skills to accomplish more than what they've been assigned, they not only become more valuable to the company but, in many cases, are rewarded by being given more responsibilities, which often comes with a higher salary. And with each step of advancement a person's salary and responsibility increases. Therefore, people are not only paid for their skills but also for the responsibility that goes along with the salary they receive.
If that is so, then it becomes important for us to understand what we mean by "valuable".
In any business, we can say that every employee is important. Just because they can't perform the duties of managing the entire organization doesn't mean they're not needed or appreciated. Without them, there would be no company. Yet without the administrative skills of the CEO to give guidance and direction, the company would soon flounder and possibly go out of business, despite all the hard work of the employees. Thus, a CEO is much more valuable to the growth and strength of a company than is any individual worker.
Furthermore, in the face of tremendous pressure to perform His duties well, the CEO is expected to perform their duties better than anyone else. To do this, they usually put in sixty to eighty hours of work each week. Therefore, it would be unfair for Him to receive the same reward as the worker on the floor who puts in only forty hours a week and who experiences a lot less pressure to perform their duty. If the CEO is entitled to a greater reward because of His greater service and skill, then it is only logical that there should also be different degrees of reward for different levels of company service.
As such, with greater income and responsibility also comes a greater risk of failure. A factory worker is less likely to lose their job for not being able to perform their duties than the CEO. While a major league baseball player receives a large salary, they worry more about sustaining a crippling injury that will end their career than does a clerk who works at a desk. The same is true of a surgeon who must constantly worry about losing their ability to properly manipulate their fingers.
Thus, people are rewarded not only for their skill and for shouldering greater responsibilities with its attending pressure but for the risks they take. A loss of income always produces hardships but the greater the income the greater becomes the hardship when that salary is no longer available. Whether a person lives in a $10,000 shack or a million dollar home, losing one's house because they cannot make their mortgage payment makes each person just as homeless. Therefore, if the risk of losing one's income is greater for one person than it is for another, then there must be some incentive for people to take the greater risk.
There is no reason for someone to take on the responsibilities of managing a company and getting paid the same as the factory worker when they are at greater risk of being fired for not doing their job than, let's say, the factory worker is. There is no point to someone spending tens of thousands of dollars to become a surgeon, when one mistake on the operating table could cause them to lose their license to practice medicine if there is no financial incentive to compensate them for their risks. There is no incentive for someone to become a professional football player where their risk of physical injury is far greater than someone working at a bank if both professions get paid the same amount. And there is no purpose to someone risking all their money to start a business that may or may not succeed if they are not allowed to make more money than the person who takes no financial risks by working for someone else.
Although there are critics who will agree with this logic, they nonetheless say that the "rich" are making too much money and are doing so at the expense of the "poor." As they see it, those with greater skills are being paid far more than they're actually worth which is depriving the poor from being paid the kind of money they deserve. While these critics are not opposed to paying skilled workers more money than unskilled workers, they claim that the skilled worker is taking a larger portion of the available money than they should thereby leaving less to be shared with those not as skilled. Therefore, they say the capitalistic system is unfair because it unequally distributes the worker's money.
There are two fallacies with this argument. The first is that it assumes there is only a finite amount of money to go around and that if someone takes more than their fair share or what they are entitled to, then there isn't enough money left to pay someone else what they're entitled to. The fallacy with this is that money is just as much of a commodity as anything else. The more demand there is for it the more the money supply will increase to meet the demand.
If what the critics say is true then, as our population increases, each person would be entitled to less and less money because the same amount of money would have to be spread among more and more people. However, just the opposite has happened. As our population has grown so has the supply of money. There is more money in the hands of more people today to buy more things than we have ever had in our country's history.
If this wasn't true then, as our country grew in population everyone in it would become poorer. Instead, we have become more and more prosperous. There's a greater percentage of millionaires in our population today than there was fifty years ago and, as we compare that percentage even further back in time, we see it being even higher. Therefore, it is a false argument to say that since some people are paid more than others that they are taking away money from someone else.
The second fallacy of this argument concerns who decides what a fair wage should be. The critics of the capitalistic system say that the government should be the one who makes that decision because they can objectively look at all the facts and come to a rational, unemotional, and unbiased conclusion whereas, if left up to the individual, they would act in their own, greedy self-interest without considering the consequences on others or to the economy.
This argument is flawed on many different levels. The first is that those who serve in government are just as prone to greed and self-interest as anyone else. However, since they are the ones making all the ultimate decisions of how much money others should get, they are highly susceptible to pressures from many different sources.
We hear politicians continually lamenting the power of "special interests" and yet, all politicians are influenced, in one way or another, by them. In our free society, there is nothing wrong with one group of people seeking to lobby Congress for their cause and, in fact, our Constitution allows it. But, the way some lobbyists go about persuading our elected officials to see things their way is with special favors. Therefore, those who decide how much money someone should make are more at risk of being corrupted in their decision making than the average person.
The second fallacy is that there is no evidence that government always makes wise decisions. In fact, the overwhelming evidence is that it often makes very poor decisions, even when they are acting with the best of intentions. There is not one government program that hasn't grown in size and costs far more than what was originally projected and everyone of them contain large amounts of fraud and waste.
Those who serve in our government are not born with greater wisdom or intelligence than the average American. Worse yet, many of them have never had any experience in business and yet they seem to consider themselves more capable of telling businesses how they should operate. Furthermore, very few politicians have any experience in the financial, medical, scientific, energy, or hundreds of other trades. Therefore, to say that politicians are better equipped to make decisions than the people who actually work in these industries and have helped produce our prosperity without government help is pure foolishness.
The third fallacy of this argument is that whatever Congress decides on becomes the law of the land which means they are the final arbiter of what is and what is not fair. If a program they implement doesn't work as they intend or has unintended consequences, we are at their mercy to correct the problem they created, but very rarely do they make the wisest improvements. In fact, more often than not, when they try to fix a problem, they usually end up making the situation worse. Furthermore, in an attempt to make things extremely fair, they end up writing legislation that is thousands of pages long that contain tens of thousands of new regulations.
However, in a capitalistic system, when a mistake is made, the free market automatically makes the needed correction and it is always the best solution. That doesn't mean that the correction is always the least painful. In fact, in many cases, it can be quite painful but it is nonetheless still the best solution. Anything less than this will only cause more pain in the future. But when the government tries to solve a problem, they always seek to make the remedy as painless as possible which, in reality, only postpones the inevitable and ultimately makes things worse, rather than better.
Too often their remedy is like someone being diagnosed with cancer who decides to take two aspirin a day to cure their condition because they don't want to endure the pain of taking radiation therapy. If someone were to do that, their cancer would only become worse and eventually they would still have to undergo the required treatment if they wanted to continue living. Yet, this is precisely how government officials often seek to correct the problems created by their programs.
In the free market, it is the pressures of supply and demand that determines what someone's value is worth. The reason why professional sport teams are willing to make multimillion dollar contracts with certain players is because that's what the marketplace calls for. If it didn't team owners wouldn't spend that much money in salaries. If a doctor were to charge more than they are worth, they would lose customers but if they didn't charge enough they would lose money and possibly go out of business. Therefore, it is the marketplace, based on what the public is willing to pay, that determines the salaries people receive.
In America, people are free to decide for themselves what they want to do and that includes what they make, the responsibilities they are willing to shoulder, and the risks they want to take. Under our Constitution, the government or anyone else is prevented from deciding how much people should be paid, what products should cost, what risks they should take or even what those risks should be. Those who want to work hard to become more valuable and therefore make more money than someone else are afforded the freedom to do so. But, whenever anyone dictates what a person can or cannot do, as long as it doesn't infringe on the rights of others, is taking away our unalienable right to the pursuit of happiness.