« Dealing with 'bads' | Main | Will we follow Japan? »

October 01, 2008

What we earn and why

What different people earn in their jobs is a topic of widespread interest and concern. This seems like a very difficult topic. Are economists able to simplify it and give logical reasons for why some workers ear millions and others earn only a few bucks a day?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Of course, everyone has their own opinion about what they should be paid and what others should be paid, but in the marketplace, in the kind of economy that we operate under, pay is going to be determined by those old standbys economic demand and supply. On the demand side, workers who bring in more money for the business are going to be more valuable to that business and therefore offered higher salaries. On the supply side, workers who are unique, who are among the few who can do that job, will also be able to command higher salaries. And in fact if you put those two characteristics together - that is, workers who bring in a lot of money for their businesses and where there are few people who can do that job - that's when you get the really, really big salaries. That can easily explain why entertainers at the national level, professional sports players and CEOs get millions a year, because they operate in an area where they can touch a lot of money, and there are few people who can do what they do. So this is the economic rationale for why people get paid different amounts of money. Many people won't like that, but it's the system that we operate under."

Posted by Dave at October 1, 2008 08:00 AM