Law of Compensation

A few days ago I was at a writer's weekend. During one meal I was listening to those around me discuss the economy and one lady mentioned that everyone should be paid what they're worth.

Isn't that a nice thought. But there's a problem with that simplistic view: How do you determine what somebody is worth?

Sure, someone may be a reliable worker. But the law of compensation limits how much that person will get paid.

The law of compensation states that the amount of money you earn is always in exact ratio to:

1. The need for what you do.
2. Your ability to do what you do.
3. The difficulty there is in replacing you.

Wherever there is a great need, there will be great money to be earned. If there isn't a great need (demand) for the job being performed, then there won't be much money involved. But need isn't the sole factor in determining how much someone gets paid.

How well you know and perform your job becomes a big factor. The reliable, hard worker who knows their job well, and does it well, becomes more valuable to the employer, or those who hire that person. It's easier to pay a little more for that knowledge and ability and experience than to use someone who doesn't have your same ability.

And the more specialized, knowledgeable, and experienced you become, the harder it is to find suitable replacement because of your ability to do what you do.

So, if you're in a high-demand profession (the need for what you do), and there aren't very many people (the difficulty in replacing you) who are as specialized, knowledgeable, and experienced as you (your ability to do what your do) then you get paid more.

The idea of paying everyone equally is an attempt to violate the law of compensation. It may sound good, especially to the low income side. But, it doesn't work without manipulation. It doesn't encourage people to be and do better. And it sets up the society for breakdown.

There are certain professions, skills, knowledge, and/or experience that are of greater worth to society than others. To think that paying someone who rings up the till behind a fast food counter the same (equal pay) as a highly skilled heart surgeon who has years of education and experience, is ludicrous. Guess what will happen in that society? People will stop learning and training to be doctors and surgeons. Most people will just do the minimum they need to in the easiest job they can get. 

Maybe that cashier or custodian is just as hard working, trustworthy, and reliable as the surgeon. But their value to society is not. Their skills, knowledge, and ability are not the same.

It'd be nice if everyone were able to get all of their needs met and we could pursue our interests and talents freely. It'd be nice if money were not needed. But we don't live in that world. Until everyone can live together in peace and harmony, some medium to show value of time, skills, talent, and abilities needs to be in place. For the world we live in that medium money. 

And here's something to keep in mind. The law of compensation is not just about money. If there no money, the services rendered by the surgeon will still be of greater value than a food server (I was about to write "cashier" but there probably wouldn't be any cashier's if there wasn't money). Because of the need, the highly skilled ability of the surgeon, and the difficulty in replacing the surgeon, something will emerge to identify the higher value and worth to society of the surgeon compared to less skilled profession. 

And guess what happens if government forces and manipulates things to make it more "equal"? Just what I mentioned before. Many of the highly skilled will get burned out from the demands placed on them without any additional compensation and they'll leave their profession or they'll want to quit. Some will stay, but most won't want to. If they can't leave, then their performance will likely decrease. 

Without the law of compensation working freely as it should, the high need of medical professionals places increasing demands on those who are working in the profession. Fewer people will want to make the sacrifices in time, education, and training to work in a high-stress, high-demand, low compensation environment.

And it's not just the medical profession. All that we do is affected by the law of compensation. If all presenters were paid the same, tickets to Joe Motivator presentation would cost the same as a ticket to a Tony Robbins event. But if Joe's presentation isn't at the same level as Tony's, people aren't going to want to see Joe. If the law of compensation didn't exist, people would equally go to either event because it would be the same to them. 

But we value our time. We certainly waste a lot of time. But we don't want to feel like we're wasting time. If we pay for something, we want value from it.

If we need something, we want that need filled. We're more likely to pay (or spend time with) someone who can fill the need. If that person has a good reputation to fill that need, we're more likely to pay (or spend time with) them. And if they're really good at what they do, and it's of worth to us, we're even more likely to pay the cost in time or money to have the need filled.