Do Your Wages Reflect How Hard You Work?
United Airlines wanted to pay out employee bonuses through a lottery. Here’s why that’s a dangerous idea.
Last week, United had a truly boneheaded idea: the airline told employees that they were not paying bonuses based on merit and hard work anymore. Instead, America’s Worst Airline™ was going to enter all its employees into a lottery system, issuing bonuses by random selection. Chris Isidore at CNN writes:
The lottery, which the airline announced on Friday, would have paid $100,000 to one lucky employee selected at random, and smaller bonuses of $2,000 or $5,000 to about 1,300 more. Other employees would have gotten prizes including 50 vacation packages or 10 Mercedes.
The overwhelming majority of United’s 90,000 workers would have lost bonuses that paid up to $1,500 over the course of the year.
On Monday, after a weekend-long barrage of intense social media vitriol, the airline announced that it was cancelling the lottery plan. Scott Kirby, the president of United’s holding company, issued a statement saying that the company’s “intention was to introduce a better, more exciting program, but we misjudged how these changes would be received by [basically everyone on Earth].”
Corporations announce dumb things every day of the year. What was so bad about United’s announcement? Aren’t bonuses a good thing?
Here’s my theory: Americans believe in a decent day’s pay in exchange for a decent day’s work. We want to work, and we want to be compensated fairly for that work.
United’s lottery overtly rewrote the contract between workers and employers. It turned away from the merit system—the idea that bonuses are tied to work output—and instead established a system based on pure chance. The lottery system simply wasn’t fair for anyone: it makes no distinction between mediocre workers and hard workers.
But here’s the thing: the tie between hard work and pay in this country has been severed for decades now, and that disconnect is only getting worse.
Ask any Econ 101 student how employers determine worker wages and they’ll likely reply that pay is tied directly to productivity. Professors have told students for decades that employees who work more — who produce more profit for the company — will earn more in wages. If they don’t make more money, they can shop their talents to other employers. This, supposedly, is the wisdom of the free market at work, regulating wages so they correlate directly with how hard and how efficiently work gets done.
Of course, that explanation is bunk. It’s nonsense. It bears no relationship to reality.
American workers today are far more productive than workers forty years ago. The Economic Policy Institute says that workers in 2016 were 73.7 percent more productive than workers in 1973, but they didn’t earn 73.7 percent more than workers from 1973. In fact, they only earned about 12.5 percent more than the average 1973 worker.
So where does the rest of that money go? Why aren’t workers earning almost 75 percent more than the less productive workers of the past? Well, that money now goes directly to corporate profits.
So much for efficiency and wages.
Something is wrong with our current economic system. It’s downright bizarre that one American is worth over one hundred billion dollars while children have to raise money to get out of school lunch debt. (There’s even a Lunch Debt category on GoFundMe, which is the single most depressing fact I’ve learned today.)
Look at that chart above and tell me: is the problem that people aren’t working hard enough? We’re doing more work more efficiently than ever before, and corporate profits are higher than they’ve ever been.
And after Donald Trump and Paul Ryan passed tax cuts for corporations and the wealthiest Americans last year, corporate America responded with a meager slate of one-time bonuses that had very little to do with hard work. Some of the companies paid out larger bonuses to long-term employees, but many of the most-publicized bonuses seemed to be flat-rate pay outs to every employee, regardless of performance.
There’s only one conclusion to draw from this: American employers no longer buy into the concept that wages should reflect a worker’s productivity and efficiency. Instead, they throw in occasional flashy bonuses that bear no reflection to the reality of hard work.
I’ve lost track of how many people I know who have been handed insulting annual raises of 1.5 percent from apologetic managers who claim “that’s the most the home office will let me raise anyone’s pay this year.” These caps send a message to workers: there’s no incentive to work twice as hard, or even ten percent as hard, because next year’s raises will bear no relationship to the realities of their job.
This divorce between wages and actual work is dangerous territory. Unless American wages rise considerably to reflect our outsized productivity, the system could break down. We might see a decline in labor discpline along the lines of what happened in the Soviet Union. Possibly workers will keep working harder until a culture of “karoshi,” or death by overwork, emerges as it has in Japan. Or perhaps workers will rise up to demand the pay that they deserve. None of those scenarios ends well for out-of-touch corporate employers like United.
