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Salary is not a measure of how hard you work, it’s a measure of how valuable your work is in this employment market. There may be rationale behind incentivising valuable work, but don’t confuse that with virtue deserving reward. https://twitter.com/1NewsNZ/status/1303875072512282624
Someone on $180k does not work four times harder than someone on $45k. If anything, the opposite trend is more likely.
“Working smart” is also held up as a virtue, despite it literally entailing “working less hard”. Again, incentivised but not a virtue deserving reward.
It’s true that hard work is often required to gain the skills and experience required to offer higher priced work and that can impact its scarcity. But the salary is a measure of economic value of a scarce offering, not moral virtue.
There are no people on $210k salaries daydreaming about a cushy life as a nurse paid a third of that because they only work a third as hard.
Also, pay jumps are exponential. Someone on 70k for a few years might look for a bump to 80. Someone on 220k for a few years might be eyeing up $250k roles. A gross increase of half a teacher’s salary.
Tax increases in the top bracket are not experienced as cents on the dollar. They’re experienced as hundreds on the ten thousands. But the take-home income jumps at that level are still experienced in tens of thousands of dollars.
Which is to say that the average post-tax pay increase in the top tax bracket is much higher than even the pre-tax pay increases of most people.
So the role of pay in incentivising more valuable work is not diminished by the top tax bracket. No one is losing interest in $30k pay increases because the take-home is an extra $19,800 instead of an extra $21,000.
Which brings us to one of my favourite observations: "Money doesn't buy happiness. Someone with $17 million is no happier than someone with $16 million."
The law of diminishing returns applies to income, if we consider concrete measures of life – happiness, health, freedom, etc. The more money you have, the better your life is, but it's exponentially more true at the lower end of the scale and exponentially less true at the top.
If someone on $50k gets a new job at $60k, that extra income is spent on things with very concrete impact on their family's life – food, healthcare, significant relative jumps in entertainment, education, etc. What does someone on $220k do when they move up to $250k?
Unless the person is quite foolish (unlikely), after a celebratory dinner which was already affordable, the extra take-home pay is invested – a deposit on an additional property, added to a mutual fund, etc.
Theoretically entailing risk, but in practice over the long term accumulating an 8 to 9% annualised return, exponentially growing more wealth for – wait for it – no hard work at all.
Anyone concerned with the penalisation of hard work should be first outraged that people working very hard in jobs which are inevitable and necessarily must be done are unable to provide their families with minimum outcomes of health, security and freedom for a liveable life.
I'll leave this here.
