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新浪首页 > 新浪教育 > Higher Pay not Always the Answer

Higher Pay not Always the Answer
http://www.sina.com.cn 2004/04/12 11:50  Shanghai Daily

  You might have seen singers who don't really sing during a live music show. They play tapes.

  What explains the economics of this fake singing? In my view, it demonstrates the failure of high pay as the ultimate incentive for improving efficiency.

  If you pay a singer 5,000 yuan a song, he or she may try his or her best to perform. At this stage, doubling the pay won't make the singer sing much better.

  But a singer often gets too much pay as organizers of music shows compete. The net result is that the society suffers a deadweight loss - more money spent for no more output.

  The same can be said about exorbitant salaries and options paid to many US senior managers. Men are so made that they cannot always enhance efficiency as they get more pay. The efficiency necessarily peaks somewhere.

  The society suffers from an excessive income or wealth gap in another way. When people in one sector of the economy get extremely high pay, those in 100 other sectors may feel hurt and seek to boycott work in different degrees. Overall efficiency of a society declines.

  For example, employees in China's banking sector used to earn a lot more than other people. I am not saying that a bank governor should not earn more than a professor.

  But something was simply wrong when a cook in the bank canteen earned a lot more than a professor. That was weird.

  Here I refer to state-owned enterprises in all sectors of the economy. I am not opposed to private or foreign companies handing out hugely different pay to different people.

  The government should regulate the pay levels of state-owned enterprises, so that the difference across sectors is no more than two times. This way, each sector will more or less attract equally capable talents and avoid a brain outflow to the banking sector only.

  The above examples of a singer and bank employees show that efficiency cannot exist without equality and fairness.

  And equality and fairness won't happen in a society dominated by private ownership.

  Professor Zhang Wuchang of the University of Hong Kong was sort of popular in China a few years ago for preaching private ownership as the best growth formula.

  He claimed that, under private ownership, there is no such thing as "the rich get richer and the poor get poorer."

  His is an illusion. Certainly there may be no big difference in salaries in the US, but the gap in total wealth is huge. And precisely because of the wealth gap, people are already unequal the moment they enter the market.

  For example, not all families in the US can send their children to renowned universities that charge a higher fee. As such, people actually don't have equal rights to education.

  It cannot be more absurd than to say that the western world is efficient while the east is clumsy. The US is an unequal society indeed, while Europe is better.

  Efficiency will not happen unless it somehow relates to fair distribution of wealth based on public ownership.

  The best way to combine efficiency and equality today is what I call a market-oriented distribution system, under which each is paid according to his or her labor.

  This system is better than both the (utopian) egalitarian pay arrangement under the traditional planned economy, and the unfair pay mechanism based on personal wealth instead of labor.

  The market-oriented distribution system, which allows one to earn according to his or her labor contribution to society, already puts man's faculty at best play.

  To ensure fair play, the government must curb illegal income by some people. I disagree with Professor Zhang Weiying of Peking University, who suggests that the government wink at illegal income of private business people in their initial stage of development.

  Professor Zhang's theory amounts to encouraging business people to be lawless, or to run on the red light, in the first place.

  This theory, if adopted, will deal a heavy blow to those people who abided by law in the beginning.

  We must also guard against corruption. A society based on private ownership may blossom with corruption, but a society based on public ownership cannot.




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