Monday, January 23, 2023

Earned Pay vs. Need-Based Pay--or, Justice vs. Injustice

A couple of years ago, major bank CEOs appeared before a Congressional committee. One CEO, Jamie Dimon of JP Morgan, was asked a stupid question by an ignorant Congresswoman, Katie Porter. According to CNN,

Freshman Rep. Katie Porter stumped multimillionaire JPMorgan Chase CEO Jamie Dimon during a hearing Wednesday with a simple question: How are workers supposed to make ends meet?

The back-and-forth occurred during a House Financial Services Committee hearing featuring the CEOs of several major banks on Wednesday. Porter, a California Democrat, shared the story of a JPMorgan Chase employee – making a fraction of what the company’s top executives are paid – who is running a $567 deficit each month because her salary is insufficient to cover basic expenses.

“How should she manage this budget shortfall while she’s working full-time at your bank?” Porter asked Dimon.

Dimon’s answer was basically that he’d have to think about, and would need to check the math. The hypothetical employee’s salary is $16.50 per hour, plus benefits. Porter used the exchange to demand that Dimon’s bank pay employees enough to make ends meet, regardless of any other considerations. 

With Dimon’s disappointing response leaving much to be desired, Michael Dahlen, writing for The Objective Standard, suggested How Jamie Dimon Should Have Answered Representative Katie Porter

As you’d expect from TOS, Dahlen suggested a good, hard-hitting moral and economic lesson to Congresswoman Porter. I give Dahlen a thumbs up. But I thought I’d take a crack at an answer myself. I composed my rough draft before reading Dahlen’s article, just to compare for myself. I must say, I think I did a very credible job. Here is my “How Jamie Dimon Should Have Answered Representative Katie Porter”:

First, let me say that a job is a two-way street. It’s based on mutual self-interest. We, as an employer with particular concerns, have as much right to do what’s best for our business as the employee has to do what’s best for herself in the context of her life and concerns. Ideally, both can find common ground and advance our respective interests together by the prospective employee accepting our job offer.

As to our policy, the employee is paid according to her productive contribution to our business, not her needs. As she gains knowledge, skills, and experience, she has the opportunity to advance in pay and position. In the meanwhile, she’ll have to figure out how to get by. Her life is her responsibility. 

We do “provide a way for families to make ends meet.” We offer jobs--good paying jobs with opportunity for advancement. But we don’t give handouts. If we pay people by need, rather than productiveness and competence, then soon enough there will be no business and the jobs, including mine, will be gone. Then how will she make ends meet? If a person doesn’t have to earn her pay, and instead get paid according to whatever she claims are her needs, then all incentive to excel at her job evaporates--along with the incentive of all of the other employees, whose competence suddenly doesn’t matter, only their needs.

Yes, I make vastly more money than her. That’s because my responsibilities and productiveness are vastly greater than hers. In fact, hers and the jobs of all 250,000+ JP Morgan employees depend on my ability to do my job competently. The only just and objective method of setting pay rates for all of these employees is merit, as judged by management and, ultimately, the judgment of the market; i.e., our customers, the ultimate end of our business. Anything other than a merit-based standard will ultimately result in inferior products, harm to our customers, and finally the loss of our customers. Need is neither just nor objective as a standard, and thus is not rational or sustainable. 

I started by emphasizing that a job is a two-way street. And as it turns out, such a relationship of mutual self-interest turns out to be win-win. Both sides advance their own well-being, based on mutual agreement. Our employees' jobs depend on a fair and rational pay policy just as much as our business does. 

I wish more businessmen would stand up for their right to exist, not just on economic grounds, but on moral grounds as well

Related Reading:

No Conflict Between People and Business

"Greed" is a Two-Way Street

If We’re to Have Labor Laws, Should They Work Both Ways?

Is ‘Common Good Capitalism’ a One-way Street?

On the Purpose of a Corporation by the Business Roundtable, PART 1

On the Purpose of a Corporation by the Business Roundtable, PART 2

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