I’m not sure how we got here, but we live in a world where money has become the unit that we use to measure value. When we ask how much something is worth, we’re asking how much money someone would be prepared to pay for it. But how much we pay for something – how much it costs – doesn’t necessarily bear any relation to its value.
Many of you will be struggling to come to grips with this idea, especially if you have some training in economics where “value” seems to be interchangeable with “price” (or “cost”). In economics prices are assumed to accurately reflect the value of whatever’s being bought and sold.
This is strange because most of the things that we truly value – life, love, health, happiness – are things that cannot be bought and sold. But even when we use money to determine the value of stuff that can be traded it often falls short of being an accurate or logical measure of value.
One reviewer of my book has accused me of economic illiteracy for suggesting that there’s something awry in paying one man (a cleaner) £6/hour to clean a toilet while another (a plumber) gets £30/hour for replacing a broken toilet seat. The reviewer cites the law of supply and demand as the reason for the difference in what the men get paid, but he’s only looking at one end of the transaction – the price (or cost) of labour. He’s failing to see the output of the labour – the value of the work done.
The difference in the price of labour between these tasks (toilet cleaning and seat fitting) is not reflected in their value to the user of the toilet, for whom a clean pan is every bit as valuable as having a seat to sit on.
Neither is the difference in the price of labour reflected in the levels of skill or training required for each task. With a few minutes instruction any willing novice can make a decent job of cleaning the toilet or fitting the seat. The value of the work done is the same regardless of the biography of the worker.
The other example that the reviewer didn’t like was the contrast between the amount of money paid to one woman who’s the director of a tobacco company (a million pounds a year) and another woman who’s a care worker (a few thousand pounds a year). The care worker dispenses love and kindness to people in need of help while the tobacco seller peddles addictive poison. It’s clear whose output is more valuable, in human terms, but our laws of supply and demand say otherwise, apparently.
My reviewer (like many other people) is wedded to the idea that the market makes rational calculations to determine the value of work done, and that value is accurately reflected in the amount of money that gets paid to those who do the work.
The reality of labour and reward is very different. The price of labour is decided more by culture than it is by economists’ “laws”, and the value of work done has little or nothing to do with the amount of money that’s given to the worker.
Think about it. If money is a true measure of the value of work done then child-rearing is more or less worthless, as is looking after sick and elderly relatives, not to mention all the cooking, cleaning and DIY, or the millions of hours of volunteer work that get done every year.
If we go to the other end of the income scale can we really believe in the rationality of the market when we see hedge fund managers being paid millions of pounds a year for doing nothing more useful than gambling with other people’s money?
The amount of money that we get for the work that we do is determined by economic geography, more than anything else. If we navigate our way into a bit of the economy where there’s lots of money sloshing around then we’ll have more chance of being well paid, regardless of our education, training, or the value of the stuff that we produce.
So what, I hear you ask?
Well, our irrational belief in the rationality of money as a measure of the value of work done has some unfortunate consequences.
For a start it makes us think that people who get paid more are somehow more competent, more useful, more valuable than those who get paid less, when, in a great many cases, the opposite is true. In general, the closer that you are to producing something or directly affecting the experience of a customer the less you get paid.
Think agricultural workers, bricklayers, roadmen, cleaners, waiters, nurses: if any of them don’t turn up for work their output will be immediately missed. Crops don’t get harvested, walls don’t get built, potholes don’t get filled, squalor takes over, meals aren’t served, and the sick are left to fend for themselves.
Now think of the administrators, managers and directors who run the organisations that produce food, build buildings, maintain roads, operate restaurants, heal the sick: many of them could be absent for weeks or months before anyone noticed. The work that these people do clearly does have some value but it’s certainly no more valuable than that of the front line workers.
The problem with the idea that value is related to the amount that someone is paid is that the expertise and talents of people who remain on the front line are typically under-appreciated and under-used. Meanwhile some talented people are encouraged to move away from doing the really productive, valuable work on the front line to positions further “up” the organisation simply because these jobs command better pay and more respect.
Another unfortunate consequence of confusing the price of labour with the value of work done is how it affects our relationship with money. Nobody can live in our society without money. Our world is organised in such a way that money is as necessary to us as air or water but there’s a morality surrounding money that’s peculiar, to say the least.
Money is seen as a just reward for work done, and those who are unable or unwilling to do work that attracts monetary reward are seen as less worthy than those who do. The moral conflation of money and work means that our society is reluctant to give money to those who don’t “work for a living”, despite the fact that their need for it is every bit as real as their need for air and water.
If I restrict your access to air or water, causing your early death from asphyxiation or dehydration, I will quite rightly be prosecuted for murder. If we, collectively, restrict your access to money, causing your early death from malnutrition or hypothermia or despair, no-one will bat an eyelid – it’s happening all the time – and our perverted morality surrounding the allocation of money in return for work is directly responsible.
The truth is that fewer than half of the people living in the UK today get the money that they need to survive as a result of paid employment. Of these, only a percentage are engaged in work that produces stuff that’s of real value to us – food, fuel, shelter, etc.
The vast majority of us get given money without producing anything of material value. And many of us do valuable work without being given any money directly in return. It’s obvious that money is not and never has been a reliable measure of the value of work done, so restricting access to money to those who are in paid employment is completely irrational.
Now that we’ve got that out of the way there’s no reason why we can’t organise our financial systems so that everyone has access to enough money every month to buy the things that they need to live their lives in comfort and security.
We can do it in such a way that it encourages commercial activity, allowing our economy to flourish. We can do it without curtailing the ambitions of those who want to be richer than the rest of us. If we do it properly we can get rid of lots of taxes and big chunks of government bureaucracy while abolishing forever the fear of material poverty.
A universal basic income can make all of these things happen for us, but they will only happen when we get rid of the ludicrous morality that we’ve built up around money and stop pretending that the price of labour is an accurate way to measure the value of the things that we do.