What work is really worth

The UK budget, and the next five years of government policy, means to persuade, or force, the workless into work. A new study examines the value of work, not to a company or organisation, but to society as a whole.

By Pierre Rimbert
Le Monde

Imagine for a moment we asked a crucial, and crucially different, economic question – not what are you paid, but what is the social return on the investment that is your pay? What do you contribute to society in exchange for your pay? It’s a reversed version of the usual monetary value question: what do you contribute to shareholders for your cost?

Three UK researchers, Eilis Lawlor, Helen Kersley and Susan Reed, overseen by the New Economic Foundation, did some original work (1) on inequalities by comparing the remuneration of professions at the top and bottom of the pay scale with the social value of their jobs. They decided that a worker at a recycling plant, on £6.10 an hour, was quite valuable as “each pound spent as salary will generate £12 worth of value for the whole community”. But “while collecting salaries of between £500,000 and £10m, leading City bankers destroy £7 of social value for every pound in value they generate.” The trio foresaw that the global result of the best-paid activities can be negative.

The study challenges standard economic theory, which considers that high salaries for higher management are a function of the value they create for their companies. “Orthodox economic thinking tells us that our utility is derived from money,” the researchers write. “The more money we make, the more utility we have. It then follows that the way to maximise social welfare is to maximise total income.”

Orthodox thinking denies any value to domestic work, often performed by women. And it fails to either take a holistic view of economic processes, or to go beyond monetary exchange, thereby undervaluing any unintended repercussions – externalities – of production and consumption of goods and services. Externalities can be negative or positive, immediate or deferred: a car transports but pollutes; a book entertains and instructs. It’s possible to assess the negative effects by calculating the costs of the negatives and positives and balancing them. To determine the net social contribution of a profession, we must consider its impacts on the economy, society and environment.

The job of an advertising executive is to increase consumption. This may create jobs (in advertising, but also in factories, trade, transport and media) but may increase debt, obesity, pollution and use of non-renewable energies. By ingenious and acrobatic calculations, the researchers evaluated the costs and benefits, and decided that “for every pound of value spent on wages, £11.50 of negative value will be generated”. They did the same calculations for an ill-paid and ill-treated hospital cleaner who does, however, minimise the risks of hospital infections (considerable in contemporary Britain).

They based their calculation on various studies including one published in the British Medical Journal, which evaluated the benefits of reduced hospital infection rates, and estimate that “for every pound they are paid, over £10 in social value is generated,” although they think that’s probably an underestimate.

By this reckoning, a tax consultant, whose job is to deprive the community of revenue, destroys 47 times more value than he creates; crèche staff, who free more time for parents, create 10 times more value than their salary.

The researchers suggest a change to our market system of remuneration, and also to the current extreme inequalities of pay, and of accumulated wealth. (A recent UK governmental report noted that one-tenth of the richest section of society possessed 97 times more than the bottom 10% of the whole list.)

The researchers cite a study by the Organisation for Economic Cooperation and Development, which showed that between the mid-1980s and the mid-2000s, economic inequalities increased in 19 of 24 countries studied. The social and health costs of this abrupt degradation are well documented (2). But what government will dare advocate the two known cures – progressive taxation on higher incomes and restriction of free trade to relieve pressure on wages?