Boudreaux and Ewell on Low Salaries of Essential Workers
By David Henderson
We’ve often heard the complaint, “Isn’t it awful that public safety workers such as firemen, whose work is so important to us, are paid so little while professional athletes are paid so much?’
Before getting to some interesting answers to this complaint, I would note that firemen in my part of California are paid a lot: by working enough years, they can get to high 5-digit salaries and, after 30 years on the job, can retire with a retirement benefit equal to 90% of their top pay, inflation-adjusted. That retirement benefit, for firemen and policemen, is what well could lead to bankruptcy for my city of Pacific Grove.
I also note that the median salary of a professional athletes is not that high. The complainers typically have in mind a small percent of professional athletes, namely those in the NFL, MLB, NBA, and NHL.
But let’s take it at face value: it is the case that firemen are paid substantially less than the average top-echelon athlete.
The usual answer that economists give is the one Alex Tabarrok gives here: it involves thinking on the margin.
And it’s a good answer. But in his class last night, Don Boudreaux gave a different take, one that incorporates the typical answer economists give, but also goes beyond that:
It’s an understandable sentiment. But when you know economics, this reality – so upsetting and mysterious to so many – is also understandable. And this reality becomes, at some level at least, a cause of celebration rather than lamentation.
First-responders’ pay is as low as it is because there are plenty of people able and willing to work as high-quality first-responders relative to the ‘need’ that we have for first-responders. With so many highly skilled and dedicated people already working as first-responders, the value of the additional first-response services that we’d enjoy if we hire one more equally skilled and dedicated person to work as a first-responder is very low. So we’re – rightly – unwilling to pay very much to hire this additional first-responder. It makes no sense to pay an additional, say, $100,000 annually to get labor services that produce an additional, say, $30,000 worth of output.
So understand our good fortune! We live in a society blessed with an abundant supply of high-quality live-saving labor services.
I should note that this point was actually in the last two sentences of Tabarrok’s post, but it’s a nice elaboration.
That’s the first part of the one-two punch. Then a student of Boudreaux’s, Ricky Ewell, added another powerful insight:
After class, one of my students, Ricky Ewell, pointed out to me that people who complain about life-saving pharmaceuticals costing so much are inconsistent if these people are also among those who complain that life-saving first-responder services cost so little.