As the last football transfer window closed and Robinho transferred from Real Madrid to Manchester City for a record breaking British amount the pundits and particularly the non football commentators ask ‘how on earth can a footballer be worth so much?’ From an Economist’s perspective the answer is simple. It is a useful reminder that markets are amoral and value what is scarce rather than what is intrinsically valuable. Robinho is worth £32.5m because his skills are scarce whereas, for example, a paramedic who has the skills to save lives and therefore of arguably greater value to society earns a fraction of that wage simply because paramedics are relatively abundant.
Hold that understanding and apply it to an article written by the Guardian columnist Polly Toynbee a few months ago, who said that society can’t do without ‘cleaners, carers, caterers and classroom assistants’. Ms Toynbee’s argument was that society needed these roles and that they also deserve a decent salary. Apply the principle that markets value scarcity and this outcome can’t be achieved by market forces alone. The roles may be seen as intrinsically valuable to the welfare of society and deserving of a decent salary, but their relative earnings will always be suppressed as the supply of people willing to take up these posts is relatively abundant (by choice or necessity).
The key point here is to challenge the proposition that somehow society can’t do without ‘low value add roles’ (from a market perspective). This is a card often played by critics who question the feasibility of a ‘high skill high value-add economy’ asking ‘if everyone has ‘degree level jobs’ who’d empty the bins’? The answer comes in two parts.
The first observation is to note how depressingly static our perceptions of society can be. In fact there is constant movement of labour, relative wages, public policy priorities and the application of technology which transform the labour market and determines which roles society can or can’t do without. Examples of this can be seen all around. Society can do without classroom assistants since in the totality of modern pre-16 education they are a recent invention; self cleaning glazing used in modern buildings is reducing the need for window cleaners; technology is advancing the productivity of office cleaners and even in offices which once had typist pools the most incalcitrant executive Chairman can now tap out an email. In a similar vein, future technology or environmental concerns could also make the role of emptying bins a thing of the past.
Secondly, assuming the refuse collector’s role hasn’t been made redundant and everyone has a degree level job in the future, bins will still need to be emptied. As already established, markets value scarcity and the task of emptying bins would then attract a wage premium by virtue that no one would want to do it. If you think such a notion is fanciful, look at the wage premium lorry drivers who drive petroleum and chemical loads enjoy over their low hazard freight driving counterparts.
Which brings us full circle, it is with a dynamic understanding of how the nature of work evolves and with resolute economic ambition to see the UK economy as one which competes on the basis of high skill high value added which creates the greatest opportunity for those in historically low value occupations to earn a decent wage.
Michael Davis
Managing Director