Skill vs Value: Freakonomics Moment

Why do day-to-day laborers who work in sweltering heat earn as much in a day as do IT engineers in an hour or even less? Why do teachers earn much less than a normal engineer?Even when we understand the amount of effort put in by  a normal IT coolie is less than that of any of the above. It may be disagreed vociferously that we are not coolies and that doing IT work needs skill, etc blah; but my experience tells me that its not a craft, just a checklist of skills to have and make a monkey do the job (well, atleast thats the direction Software Engineering seems to be taking ;)). Hey, anyway but seriously, lets come back to the question shall we?

Its actually not about the effort! Yes, my dears its not at all. Its as they about the skill. Or more specifically to define skill as, its about the value you create or have the skill necessary to be able to create such a value(wealth). Value here is more necessarily about the skill than about the value. So the more you are in a position to create/control value, the more your value is in the chain.

Now the above reason answers only half the question, that of daily laborers, teachers, soldiers getting much less than the IT engineers and they inturn getting much less than the celebrities. The unsaid second half of the question is ‘How can this problem be solved? A laborer can prolly get literate and move to be say a clerk. But what happens to a teacher or a soldier? Their value is irreplacable…’ The answer to this lies in free markets.

As of now the only factor that we talked about that determines the salary is ability to create value. Now the other factor is Supply & Demand. Say if all of a sudden all our soldiers start leaving the army, teachers too and the say the laborers too. Now how do we get all the work done? Pay them more dude. Or pay people who are actually willing to do only at such high price.

Well, this could be a better way to retain the best minds in the teaching field where they are actually creating a lot of value. And the best people on the field in army. As for the day laborers, the value will be evident once they stop doing work 😉

So reiterate how do you retain your best minds in teaching jobs? Pay them more!


8 thoughts on “Skill vs Value: Freakonomics Moment

  1. I don’t think we’ll ever see the day when “As for the day laborers, the value will be evident once they stop doing work”… As you said it is a matter of demand & supply, there is just too much supply of labour as compared to the demand for it.

    Some days back I read a blog of some US guy who had recently visited India and he was amazed that we have people to do every kind of work, he compared the amount of labour available here to the abundance of water in US and scarcity of water in India to scarcity of labour in US.

  2. Hmmm, thought provoking.

    I remember one article I read in my childhood about the Wheat and the Rose… though Wheat is the basic need, one kg of wheat will always be cheaper then a Rose Bouquet…

    Its the concept of luxury that comes with a Rose makes it so expensive.

    in simple words, the very difference between just a life and a Lifestyle 🙂

    I guess, at times economics doesnt depend on just demand and supply only.

  3. This reminds me of the fact that some humble businesses in the old bazaar earn much more than a teacher does. The issue is not just about creating value. It is also about intrinsic commitment to a cause. It s also a matter of whether the teacher enhoys teachig at all or are there just to pass tme- Make your passion your profession

  4. One aspect is that there will always be teachers, soldiers and labourers in their resp fields, for sheer love of the job (okay, I’m not sure about labourers but I like to think atleast some of them are happy doing what they do). And we tend to assume the existence of such people will continue in the future…
    So when you have such people who couldnt care less about salary, does it decrease their value?

  5. @kunal
    if you seriously think theres a lot of supply of laborers think again, at least we are at a severe shortage. with all those skyscrapers just growing up vertically its not such a case 😀 but of course that explains their increased wages and a bit of cockiness (read return of dignity of labor) 😉

    as for the guy, im pretty sure that must be vikrum sequeira, if im not wrong.

    @rakesh & kiran
    Thanks guys. Just had my fill of good economics.

    dont even think of humble businesses. there are food business in an around the place where we live where a moderately good place earns about a 30 grand a month. think of all the hair fall, beer bellies and sleepless nights we go through…! but seriously as my dad says,there are a million jobs that are around if we just try give them a good look earn much more than any of the IT guys can ever make in their life!

    that apart, though i agree its about the commitment; though there are people who may be interested in teaching dont go to the job mainly because they pay peanuts. sometimes when my choice is between a 4k paying school teacher and a 30k paying IT engineer; commitment more often than not goes down the drain.

    and frankly, with the number of teachers im getting in contact with; theres no way they belong to the top 1% of the graduates; their profile more often than not belongs to the lower 1%. believe me, its sad but true.

    you’ve got me all wrong. lets phrase it this way. my concern is when teachers who are in the most important roles in a society and its future; when paid in peanuts doesnt attract the best of the minds. it attracts the average and the below average and as you said in cases of exceptions great minds.

    dont get me wrong, i have the highest respect for the role of a teacher and so my concern for the type of people coming into teaching field; the only incentive for a bright mind to come to teaching field seems to be the passion and not the salary which frankly is not a good logical way to things. if we need to ignite the younger minds, we need the norm to be great minds not the exception.

  6. i get your point 🙂

    ‘for a bright mind to come to teaching field seems to be the passion and not the salary which frankly is not a good logical way to things.’ – i disagree…if the salaries were to be increased, who’s to say that more average ppl won’t join the field for the money then? like the sw industry today – anyone who can, gets in. Sure enough, you will have *some* of the best minds too…but after all, how ‘best’ is a mind if it is where it is, for money alone?

    There should be a way of making the value of the job much more enticing than the salary. Such people are already in the field, and will continue to be. I think it’s a matter of propagating the ‘value’ image more than a good pay…

    Not that I grudge the teachers/soldiers/labourers a good salary…God knows they deserve a lot more!

  7. Hello,

    I think the wage paradox occurs because of the momental marginal utility for that particular job. Replacing a teacher is cheaper than repalcing an IT.
    But keep in mind that is a possibilty that in the future will cost much to replace teacher than a IT. (because times determinate this).

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