Tuesday, March 22, 2011

Is it Possible to be Over-Paid?

Teachers strike for more pay, better benefits, even though their working conditions and compensation package is far and above that of the average worker in America.  Is it possible to be overpaid?  YES.

In his book Predictably Irrational, Dan Ariely makes some interesting observations, one of which is the distinction between commercial and non-commercial activities.  One example he gives is the unloading a sofa test.  They park a truck in New York with a sofa on the back, asking passersby to help them unload it.  An odd effect occurs - if they ask people to help unload the sofa as a "favor" many people agree to help.  But if they offer to pay someone $10 to help them unload it, most people walk away, often saying rude things.

It turns out, he says, that people will work harder for less money - or no money - because they want to.  Once a transaction becomes monetized, people actually work less hard.  When it becomes all about the money, people actually work less.

People will do for free, something that they would not be paid for.  It is an interesting phenomenon.  And Ariely's conclusions about this are interesting, but in some respects, wrong.  For example, in the teaching pay debate, he argues that "merit pay" will backfire, as it makes the job of teaching money-oriented.  And when it becomes all about the money, then people stop doing things because they enjoy doing them, but rather just for the cash.

And he may have a point.  If "Merit Pay" creates a system whereby teachers make more money for hitting certain goals, no doubt some (or many) will "game the system" to get more merit pay.  But a similar effect exists today in teacher pay - there is a system and many are gaming it.  Teachers in many parts of the country are paid not only on seniority, but on educational level.  Few are paid on performance.  And few can ever, ever be fired.

So it is not surprising, for example, that in a list of local teacher's salaries, the ones breaking the six-figure amount all have "Dr." in front of their names, as they have PhDs.  And teacher friends of mine report that getting additional degrees is "the name of the game" and most of them spend their summers pursuing additional Master's degrees or PhDs in education and childhood development.  We have well-credentialed teachers - and very well-paid teachers, but we have one of the worst educational systems - in terms of results - in the Western world.

When people are paid far too much for their work, then tend to work less hard - and the job becomes more about the money than any dedication to work.  And I saw this firsthand at GM back in the 1970's.

One of my assignments as a GMI student was to go through the entire payroll of a GM plant, in 1979.  A foreman had "lost" the entire payroll for his department, and management wanted to stress how important it was to keep track of this money, as over time, it represented millions of dollars.

So they handed me a computer printout of the entire plant's employee payroll - about 6,000 people.  And what was surprising was that a lot of very unskilled people were making a LOT of money.  For example, the typical "material handler" (fork lift driver) was paid, with overtime, $42,000 a year.  Today, that would easily equate to $150,000 a year or more.  And even today, $42,000 a year is nothing to sneeze at, particularly with the very, very cushy benefits package (medical, dental, eyeglasses, pension) provided.

So, these were the highest paid fork lift drivers on the planet, right?  They must be GOOD and work like DOGS, right?  Actually, no.  Actually, the guy running a forklift at a competing plant, making half as much, probably worked twice as hard.

In an incident I recounted earlier, I asked one of these gold-plated forklift drivers to move a pallet of parts 20 feet so we could feed them into a machine and keep the assembly line running.  He told me that "work rules" prohibited him from moving the pallet the last 10 feet, and that the other fellow who was supposed to move the pallet that last distance, was "on break" for the next half-hour.

He finally agreed to move the pallet, and of course, we were both slapped with a "grievance" by the union.  And you want to understand why GM is bankrupt?  There is your answer right there.

Most of the employees in that plant were there for the money - and most were terribly unhappy, even though they were making 2-3 times as much per hour as workers in the surrounding community.  It was odd, but the more you pay someone, it turns out the less hard they work.  People in that plant actually sabotaged the assembly line on more than one occasion.  It was an odd effect.

And maybe that is the problem - the money.  And in the professions, you notice this more clearly.  People who enter a profession "for the money" are rarely satisfied with the money - nor are they very good at their profession.  And I saw this in Engineering and in the Law, and in Patent Law.

In the 1980's, after Polaroid v. Kodak, the number of Patent filings skyrocketed, and suddenly, everyone needed a Patent Attorney.  We were in high demand, and the salaries were pretty lucrative.  At the time, it was good fortune for me, as I sort of fell into the business back then.  I enjoyed the work (and still do) the money is just a bonus.

But I saw a lot of young people actually setting out to become Patent Attorneys (instead of just ending up as one, as I did) on the premise they would make "millions of dollars".  And what they discovered was that that sort of money really isn't out there, other than for a very few people who often have to do very odious things to reach that level.  And what I noticed, is that the people who were "in it for the money" were pretty lousy Patent Attorneys.  The had no passion for the job - no interest in the inventions or the law or the procedures.  Instead, it was all about billing to them - and no amount of billing was enough!

Today, the business has died down a bit.  It is still a lucrative profession, compared to most, and I can make as much money as I want - but it turns out I don't want much.   What I enjoy about the job is the work itself - working with inventors, innovation, and the latest technology.  And more than the money, what I enjoy is the independence it affords me - the independence to live on an island and just write bullshit in my blog for an hour a day, if I choose.  Or spend an afternoon at the beach.  Or both.  Money alone can't buy all that!

But in terms of satisfaction - Happiness - the folks who were "in it for the money" never seem to be very happy.  And in fact, many of them get out of the business because they don't like it, and because the riches never materialize.

It is an interesting conundrum, and I can cite numerous examples of people who chased the almighty dollar and ended up miserable.  For example, the annoying young woman (which I wrote about before) who told me she was studying Engineering because (as she put it) "It was either this or being a Doctor, as both fields make a lot of money, but Engineering seemed like less work".   And as you might guess, her Engineering career went nowhere awfully fast.

To be an Engineer - an effective one - you have to have a talent for it and a love of the technology.  Being in it "for the money" is surely going to disappoint, as Engineers don't really make a lot of money these days (if they ever did).

Getting back to teaching, I think the same effect is happening.  Teaching today is a very, very lucrative profession - one that, over time, can pay a six-figure salary and provide stellar benefits and a very cushy retirement.  The stereotype of the "poor underpaid teacher" is a myth today - most are very well compensated for their efforts after only a few short years.

And perhaps this has attracted more people to the profession that want the money more and the teaching less.  Back in the day, if you wanted to be a teacher, it was because you wanted to teach kids.  And yes, perhaps "back in the day" it was a profession that attracted a lot of Women, because frankly career options were very limited for Women back then (only 50 years ago).  And yes, back then, Women were scandalously underpaid in whatever field they worked in.

But if you wanted to teach back then, you wanted to teach, because the pay sucked, and anyone who got into teaching for the money was an idiot.  Well, frankly, they didn't exist, because there was no money.

But today - well, you can become very wealthy teaching.  And not surprisingly, a lot of retired teachers live on our little island here, in half-million dollar retirement homes.  Underpaid?  Impossible.

So the profession attracts money-seekers.  But what of the dedicated teachers?  When the money-seekers flock to a profession - and the unions jump in - the dedicated workers flee.  And this is true of any job or profession.

At the GM plant, there were people who wanted to do right by the company - people with a "work ethic" who confessed to me that they felt scandalously overpaid and under-worked - mostly older people, to be sure, who knew what their labor was worth.  But the plant beat that right out of them.  They literally had to HIDE their productive efforts and put on an appearance of goofing off, as if others saw them working "too hard" the union would come down on them.

And the same is true in any other over-paid profession.  You work hard, you earn the wrath of your co-workers.  And once it becomes "all about the money" people spend more time trying to figure out who is making more than they are.  And that can sap the will from a productive worker very quickly.  When you see a guy in the field "just for the money" making out like a bandit (or so you think) working hardly at all and making more than you do, well, it saps your enthusiasm for the job.

One reason I am self-employed is that, at the firms I worked in, most of the Associates and definitely all of the Partners, were obsessed with money all of the time.  How much is the other guy making?  How come I'm not making more?  With the Partners, it was worse - with bitter fights and feuds breaking out over who should be compensated more from the partnership profits.  Firms break up all the time over this.  And it distracted from the work at hand.

When I came to work one Monday morning, only to find all the locks were changed over the weekend and half the partners booted out - people who, the week before were "close friends" - I realized that the law firm life was not making me happy.  I liked the work a lot, but the money got in the way of being happy.

Today, I am probably underpaid - a lot.  I sometimes worry about this.  Am I being exploited, or should I be charging more money for my services?  I haven't raised my hourly billing rate in a decade or more.  Indeed, I rarely charge it, but do most work by a flat rate.

But there are other compensations that are better than money.  The money-seekers in this business always have to bring in new clients, as they charge so much that most of the old ones are going out the door half the time.  And their overhead is usually astonishing.  And since they have this money-hungry machine they have to run, they have to get more and more clients - including problem clients, which I have written about in the past.

One sweet luxury I have is the ability to say "Fuck Off" to a client (in not so many words, of course) if they are annoying or pay slowly, or are just trying to pull a fast one.  My clients feel they are lucky to have me.  And if they don't feel that way, they aren't my clients.  I rarely advertise.  I don't chase after clients - I do no "rainmaking" as everything is by word of mouth.

In short, I own myself.  And buying yourself is the most expensive luxury item you can have, as I have noted before.  And that is a satisfaction that money alone does not provide.

Back at the height of the "dot com" bubble, a major nationwide law firm hired me at what seemed like a lucrative salary.  What was interesting about the deal (I lasted six months before quitting) was that the hassles of the job were not worth it to me.  And the vaunted "big paycheck" always seemed like it was never enough.  We had to take one some pretty odd clients and very demanding clients at that (they paid a lot of money, so they felt entitled to treat us like crap).  I learned a valuable lesson there - money ain't everything.  In fact, it really isn't anything, beyond your basic needs for comfortable living.

The backlash against teachers isn't going to go away, for the simple reason that the Teacher's Union didn't do the math on this one (no pun intended) and didn't see that scandalously high property tax rates would eventually make enemies of every tax-paying citizen in the County.  High pay is a fine thing and all, but when Joe Homeowner is shelling out $5000 a year in school tax, well, don't expect him to be your chum, particularly when his kid graduates from your school as a functional illiterate.

And yes, Mr. Ariley may be right - merit pay may backfire, particularly if they use it in large amounts to "attract" good teachers.  Because the kind of teachers attracted by high pay are, by definition, not going to be good teachers.

But, when teaching kids becomes a Union job, it chases away dedicated teachers.  No one who likes to teach for the sake of teaching wants to deal with union lackeys and their silly work-rules, which usually favor the slackers and the least qualified people, at the expense of the hard workers.  And teachers I know - the good ones - complain about this all the time.  The dedicated teachers DO NOT LIKE the union scum, who spend all their time trying to prevent the crappy teachers from being fired.  And the crappy teachers hate the good teachers for "showing them up" and they in turn try to start trouble for the good teachers.  And it happens in every profession or work setting, where unions are present.

Merit pay is a good idea - but so is being able to hire and fire on merit.

Getting back to my years with GM, one problem with the Union was that it was nearly impossible to fire anyone. One slacker actually punched his boss in the face and was fired.  The union stated, as a demand a contract time, that he be re-hired and given back pay with interest.  And foolishly, management capitulated (the union leaders told me privately that this amazed them, as they were prepared to drop the demand - even the union lackeys aren't that crazy!  So union problems are also management problems - when weak management fails to stand up to the unions when the battles are worth fighting).

The net result was that the foreman who was punched, quit.  And he was a good foreman, too.  And of course, the fellow was re-hired never did any work ever again - he just loitered around the plant, as the foremen were not going to challenge a guy who can indiscriminately punch management in the face and not only get away with it, but be financially rewarded.  And the effect this had on the other workers was noticeable as well.  Most were disgusted and disappointed that management didn't exert a firm hand here.  Most workers WANT to work hard and CRAVE some sort of discipline in the workplace - for their own safety and their own sake.  Rather than "cause a scene" with the union, management backed down.

Are you starting to understand why GM went bankrupt?  It is not hard to figure out.

And a similar effect is playing out across our country right now, as government leaders struggle to take back control of our governments and our schools from overly-powerful unions.  And many are calling for governments to "back down" or "compromise" on some of these issues.  But I think compromise, in this instance, is a sign of weakness - it telegraphs to the union leadership that a few protesters, some chanted slogans, and some bad press are enough to make management (government) fold like a cheap tent.  And if they fold here, they will  fold again - the union will be emboldened.

This may sound cruel, but if you lower teacher pay, the people "in it for the money" will quit - or not be attracted to the job in the first place.  There is no "teacher shortage" today, as enrollment in most schools is down, due to demographics. So why pay more?

But of course, the real issue is the fact that we've run out of money - at both a government and personal level.  Taxpayers are being taxed out of their homes, and that well has been pumped dry.  It is not a matter of policy choice that government employees across the board will have to take pay cuts, but a matter of necessity.  Of course, some States, like New York are taking a different tack - just cutting jobs instead.

And there is an interesting litmus test to determine whether you are in it "just for the money" or not.  Would you rather see 10% of your workforce laid off, or would you rather see an across-the-board 10% pay cut.  The financial effect is the same, of course.  But job cuts would mean more students per classroom and a worse educational experience - plus 10% of your friends being unemployed.  If you favor that route, you are clearly "in it for the money".  But if you favor a pay cut instead, maybe you really care about the school and the kids.