by Robert Bragaw

Created on: October 13, 2009

The question that is really being asked here is how can we establish a value for work. Is a U.S. worker earning $10/hr answering phones at a call center overpaid compared to her Indian counterpart who earns approximately $1.10/hr (see http://www.swivel.com/data_columns/show/7017027)? Using a straight-line comparison of hourly wages, the U.S. worker is paid significantly more. However, a more honest comparison would be to compare the purchasing power and quality of life that the earnings of the respective workers could buy. We don't have to go to India to make that comparison though. If you compare a U.S. worker earning $10/hr living in New York City with that of a U.S. worker earning $10/hr living in Joplin, Missouri, you'd quickly find that while the worker in New York City might be underpaid, the worker in Joplin, MO, is probably doing pretty well (

http://wiki.answers.com/Q/What_city_has_the_cheapest _cost_of_living_in_the_united_states).

Instead of comparing wages among various geographic locales, it might be better to compare wages earned over time with the increases in cost of living. Consider that while most Americans have not seen large increases in their net earnings, the cost of some common items has increased dramatically. For example, the cost of consumer credit has dramatically increased for many people, either through increases in the interest rate or an increase in the minimum monthly payment. The cost of gasoline over the past decade has soared without corresponding increases in fuel efficiency. The result is that most Americans are paying far more to fill up their cars now than they were a decade ago. The cost of rental housing has increased; the cost to purchase a new home (although having declined substantially over the past year and a half) is still much higher than it was a decade ago. The point is that for most Americans, real wages have not kept up with the cost of many of life's necessities.

Another aspect of value has to do with scarcity. The value of having someone perform a particular type of labor is dependent upon the labor supply in that market. In certain markets where there are large numbers of low wage, retail positions, wage rates may be increased due to the scarcity of workers to fill those positions. The same is true on the other end of the spectrum, where certain semi-skilled positions have seen a decline in the wage rates being offered because of an oversupply of workers capable of filling the positions. This happened in the South when foreign auto manufacturers set up plants and hired non-union workers to fill many of the positions, which had traditionally been held exclusively by union workers. The result was a decline in wages at those plants.

Finally, the value of work can be examined in terms of results. This view is typical of many manufacturing positions, which were originally paid on a piecemeal basis. In other words, rather than earning an hourly wage, manufacturers paid their workers by how many widgets they could produce during in a day. Piecemeal work has largely been replaced in the manufacturing sector with hourly wage rates; however, in the agricultural sector piecemeal wages are still a common method of payment. Viewing labor in terms of results is difficult to do when the worker is in a service or support function. It's not impossible, but it is more difficult. And, when examining executive compensation, in particular, it appears that in many instances, the correlation between performance and pay is tenuous.

In conclusion, the data supports a finding that people are generally not overpaid.

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