Tuesday, March 01, 2011

Detecting overpaid workers

Economist Steve Landsburg explains why you should ignore the complaints of those getting pay cuts:
If you cut the pay of an overpaid worker, he’ll generally scream bloody murder. After all, overpaid workers like to stay overpaid. But if you cut the pay of a non-overpaid worker, you haven’t really damaged him. He just quietly leaves and gets a job elsewhere. After all, the ability to find a comparable job elsewhere is pretty much the definition of not being overpaid.
The more they scream bloody murder, the more likely that they are grossly overpaid.

There are exceptions, of course. Sometimes people cannot easily change jobs for other reasons. Maybe Charlie Sheen really is underpaid, at $2M an episode. And maybe the Wisconsin teachers are underpaid. But it is unlikely.

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