Work, Productivity & Pay
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Work, Productivity and Pay

Wanjiru Njoya, PhD (Cantab.) MA (Oxon.) LLM (Hull) LLB (Nairobi) PCAP (Exeter)
​Fellow of the UK Higher Education Academy

​​​

Rich and Poor

3/4/2017

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Markets are almost like a lottery with a few winners and a whole bunch of people who end up out of pocket. In any market economy there will therefore be a distribution of wealth, with some people being classified as rich and others as being relatively poor. This brutal fact strikes many people as unconscionable. It simply doesn't seem fair that anyone should have more than others, when all human beings are equal in virtue of their humanity and people can't easily opt out and choose not to play the capitalist game.

​The essential 'unfairness' of capitalist markets extends to the workplace, where everybody is not paid the same wage. I know, shocking. Presumably the higher earners think their wages are fair and the lower-waged think their wages are unfair. Short of paying everybody the same wage, is it ever possible to agree on a measure or standard by which we can determine whether wages are 'fair'?

People derive greater meaning and satisfaction from their work when they consider their remuneration agreements to be a 'fair' reward for their contribution. This outcome is not easy to achieve when wages are offered on a 'take it or leave it' basis and very few people actually have the opportunity to bargain for a wage they would consider 'fair'. Nor is it easy to see what legal claims can be brought to secure a 'fair' wage. The wage-work bargain is regulated by the law of contract, and the mere fact that the worker had no room for negotiation is not enough to make the bargain 'unfair'.

This used to be clearly stated long ago, in the golden age of freedom of contract
:​​

No doubt, wherever the right of private property exists, there must and will be inequalities of fortune, and thus it naturally happens that parties negotiating about a contract are not equally unhampered by circumstances. This applies to all contracts, and not merely to that between employer and employee...

​Coppage v Kansas (1915)
​

​Although that particular formulation of 'freedom of contract' being presented almost as a justification for income inequality would not fly today, the law still holds people to the bargain they actually agreed upon, not the bargain they should have agreed or would have liked to agree.

This means that many people will agree to take a job for a specified wage even though they do not think the wage is fair. Perhaps they need the income, and being underpaid may be better than having no income at all.  So many people end up unhappy about their income and generally unhappy about the inequalities of fortune reflected in wages generally.

The point is poignantly expressed by Rose Wilder Lane; although a staunch defender of individualism and capitalism she acknowledged the realities of inequality, and the simple fact that it's really, really, infuriating when some people are rich to excess while others are struggling to make ends meet: ​

​Many of them spend stupidly and wastefully as much as can possibly be spent in the most luxurious and decadent manners of living, and this spectacle is infuriating. Many a time when my bills and my debts have been piling up and my most frantic efforts have failed to dig a dollar or any hope out of this chaos, so that the nights were harder to live through than the desperate days, I have thought of those jewelled women carelessly dripping handfuls of gold pieces on the tables at Monte Carlo, of those quite charming necklaces worth a hundred thousand dollars and the fur coats for only $25,000. Did I say, infuriating? The word is mild.
​
Quite. But even though no modern court would echo the words of Coppage v Kansas, for fear of inciting people to riot, it is not necessarily clear what law can or should do about inequalities of fortune. Everybody has their preferred ideas on what can and should be done, but unless one can get everybody else to agree then we remain in a situation where the law really has nothing to say about that: 

​Indeed, a little reflection will show that wherever the right of private property and the right of free contract coexist, each party when contracting is inevitably more or less influenced by the question whether he has much property, or little, or none, for the contract is made to the very end that each may gain something that he needs or desires more urgently than that which he proposes to give in exchange. And since it is self-evident that, unless all things are held in common, some persons must have more property than others, it is from the nature of things impossible to uphold freedom of contract and the right of private property without at the same time recognizing as legitimate those inequalities of fortune that are the necessary result of the exercise of those rights.

Coppage v Kansas
​
​The law has certainly moved on since 1915, on the specific issue at stake in that case, and we do have a vast framework of tax legislation engaging in redistribution, but there is no specific legislation to resolve the problem: no Eradication of Inequality Act, for example. Who would such legislation target, and to what end? Who is to blame for inequality - is it those who inherit wealth, or those who strive to build great fortunes? What sort of legal remedy could be fashioned, that implements wealth transfers without infringing on anybody else's rights? 

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