Will Hutton\’s investigation doesn\’t look good.

Willy lays out his approach to this study he\’s doing on pay multiples:

My instinct is that the parents\’ gut reaction is the one on which to build a consensus. Most of us subscribe to the view that proportional effort deserves proportional reward, even while recognising that luck and other people\’s efforts matter – a set of principles to which even egalitarians and libertarians can rally. It is proper that great efforts should be proportionally rewarded and recognised; individuals do make a difference ( the libertarian stance) even while they operate in wholly social contexts (the egalitarian position).

No, no, no, no, no.

We are not interested in basing pay or reward on effort put in. We want to base it on results coming out.

We really don\’t care that someone works 80 hour weeks or 1 hour weeks. What we care about is what do they produce in that time which the rest of us value?

We don\’t give a child an A grade because they\’ve spent a long time on their homework. We give them an A grade because they\’ve got the right answers.

Even though we do measure government\’s contribution to GDP by the amount of tax money we pour into it, we shouldn\’t: we want to be measuring it by what we get for what goes in. The reason we don\’t is that it\’s very difficult, although as those recent studies on the productivity of the NHS show, we learn some very interesting things when we do measure output properly.

Similarly, we don\’t measure corporate success by the resources used (the \”effort\”) to produce. We measure such success exactly the other way around: it is the excess of production over resources or effort put in that makes profits.

So it is with individual wages. The effort put in, the time spent, is not the measure we want to be basing rewards or pay upon. We\’re interested in results, not inputs. To take this case being talked about, the teacher earning £200,000 a year (and yes, it\’s a multi-year pay award, some of the cheque is for work done in previous years, and so on and so on). If he was able to turn around a school in an hour a week then he\’s worth that £200,000, just as much as if it takes him 100 hours a week to achieve the same result.

Note please that there\’s still room for the complaint that no one is worth that much, that it\’s a collective enterprise, that it\’s all just luck, all of the traditional complaints about such pay. My point here is that Hutton has leapt upon the wrong thing to measure when determining merit.

It absolutely is not effort which justifies pay: it is results, output.

Think of it this way. We\’ve two head teachers. Both work 80 hours a week. One\’s shite, entirely terrible, should be sacked for incompetence (that William Tyndale bloke for example). The other is our sterling example already mentioned. Both have the same effort going in: but we most certainly do not determine their \”fair wage\” on the basis of that 80 hours.

We all agree that one should be getting nothing for their 80 hours of effort and while the other might not be worth that £200,000 we are at least willing to keep paying him something.

But if this is what Hutton is going to base his report on, this idea that fairness is determined by inputs, not outcomes, then his entire study and report is going to fail. Because he\’s started from entirely the wrong assumption.

But then with Willy t\’was ever thus, eh?

7 thoughts on “Will Hutton\’s investigation doesn\’t look good.”

  1. The elephant in the room is the monopoly the State has over Education and the Monopoly position of the unions and (national) pay scales.

    If you gave schools money to cover all running costs including wages, then the correct wage for a headmaster will be about right most of the time. It is not perfect, but it is infinitely less flawed than standardised scales and only an upward ratchet.

  2. In the State sector, it’s very hard to measure outputs, how much value does a Five-a-day Coordinator or a Play Supervisor add for instance? It is easier to measure inputs however: all those poor State employees beavering away, sodding up the economy.
    Therefore, for a Statist like Mr Hutton, inputs are what he wants to measure.

  3. Will the Marxist, still holds the labour theory of value to be true.

    Almost uniquely in state education, there is a Market in head teachers pay, and the better heads make much more money than the poor ones, when compared to the added value of a school. One of the many measurable outcomes of state activity.

  4. Tim, I think you’re missing the point here. Will’s comment: Most of us subscribe to the view that proportional effort deserves proportional reward doesn’t make *economic* sense, but in terms of human nature, it’s true.

    People have a strong sense of fairness that’s based primarily around equal inputs than equal outcomes (through most of history, the two have been basically the same – sure, whoever *first* invented farming provided the greatest contribution to anything ever, but in most communities most of the time, nothing innovative took place in the course of most people’s lifetimes…)

    The challenge is to reconcile people’s sense of fairness with the efficiency that markets bring. I’m not sure what the best way to do that is, but I’m fairly sure it isn’t to laugh at the majority of people who retain the view that input is important and tell them they’re Marxist eejits.

    Tim adds: Mebbe: but the whole point of handing things over to commissions, technocrats, the Great and the Good, rather than leaving it to the rabble at the ballot box, is that they are supposed to rise above mere emotion and deal with things on a more rational basis, no?

  5. Aye, but they still have to get the rabble at the ballot box to buy into their plans (otherwise, defeat / tumbrills, depending on the system’s flexibility…)

  6. “We don’t give a child an A grade because they’ve spent a long time on their homework. We give them an A grade because they’ve got the right answers.”

    Maybe not the absolute greatest comparison to pick!

    These days, they give them A grades because they ALL get A grades, no?

    As long as they display the correct social attitudes and the proper righteous opinions, of course.

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