During the NFL offseason, star running back Saquon Barkley signed a $40 million contract extension with the Philadelphia Eagles. No doubt, he earned this award by rushing for 2,005 yards in the regular season and helping bring Philadelphia another Lombardi Trophy. I’m not the only one who thinks so. One sportswriter said, “He deserves it…Barkley is easy to root for, not only because he can jump over people backwards, but because he works hard, is kind, and is a great teammate.”
Few would argue that it is morally wrong for football players and other performers to earn tens of millions of dollars. But if CEOs make the same amount of money, that’s a symptom of greed, exploitation, or the disease of late capitalism.
Even when fans complain about the high salaries of those who make a living playing the game, it never involves the vitriol that comes with complaints about CEOs. Why do people react so differently to the wealth of celebrities and the wealth of executives?
I have a few assumptions: (1) It’s hard to understand the value that management creates, and (2) people suspect that management is making millions by exploiting the labor of its employees. But both of these concerns are misplaced. What really matters about compensation is that it is the result of the value created by the individual. That’s why CEOs, like star athletes, should receive market wealth.
Let’s examine each of these conjectures about different reactions to high wages. First, in the case of athletes and entertainers, the value they create is visible. You can literally see Barkley hurdling backwards over defenders. You can tell he’s special because no other running back in the league does the same thing. So the relationship between what Barkley does to help his team win and the amount of money he makes is clear. Similarly, you can hear Taylor Swift sing and see packed stadiums and overjoyed fanbases. Maybe you’re not a fan of her music, but you can understand why she became a millionaire.
In contrast, the CEO’s contribution is buried in spreadsheets and meetings. If they make the right decisions, the company will grow. But looking at Berkeley’s management, I don’t see that happening. There is no highlight reel for efficient logistics or better management.
Just because you can’t see the value being created doesn’t mean it’s not real. For example, a good coach helps his team win even when he’s not on the field himself. Not only do they design plays and motivate players, they also hire assistants, establish organizational culture, and advise on draft picks. CEOs are somewhat similar. Starbucks’ CEO isn’t behind the counter pouring coffee, but he’s helping create and manage the processes and institutions that make it possible for millions of people to drink a latte every morning. Just because someone’s contribution to an organization’s success occurs “behind the scenes” and is therefore less visible than others’ contributions does not mean that their contribution is less valuable.
Second, people tend to be distrustful of money earned by employing others. It’s not a question of getting rich by selling tickets to performances. They are simply happy customers. But many people object to CEOs getting rich at the expense of employees who actually create value. This is what people mean when they say that employers exploit workers’ labor.
But employers don’t exploit their employees any more than Saquon Barkley or Taylor Swift exploit their fans. In important respects, the contracts that entertainers enter into with their fans are similar, both economically and ethically, to the contracts that employers enter into with their employees. Both are the result of contracts that people voluntarily accept in hopes of improving their lives.
Milton Friedman, the great economic communicator, said, “The most important central fact about free markets is that no exchange occurs unless both parties benefit.” In effect, Taylor Swift is making an offer to people: “If you pay for the tickets, I’ll give you a concert.” There’s no need for non-fans to bring her up, and there’s nothing wrong with them being given that option. On the other hand, a devoted Swiftie probably believes that buying a ticket will make her life better and will accept the deal.
Employers make similar offers to prospective employees: “If you pour coffee for customers, we’ll pay you a certain amount on an hourly basis.” If you don’t want the job, you don’t have to take it, and there’s nothing wrong with accepting an offer. On the other hand, if you think earning money as a barista will improve your life, you’ll accept it.
Some might argue that the employer is more exploitative than the entertainer. Because being unemployed is far worse than having no entertainment. So, from any meaningful point of view, someone has no choice but to get a job. There is no space here to elaborate on this point, but suffice it to say that even if one is sympathetic to this objection, it makes little sense to specifically blame the worker’s employer, assuming that the employer is not responsible for the worker’s wrong choices. The worker’s employer is the one who made the highest offer received by the worker, as evidenced by the fact that the worker accepted it in preference to all other offers. So if you want to criticize someone, you should blame all the employers who offered workers worse conditions or no conditions at all.
This is the important point. Just as entertainers attract audiences by offering something of value, business owners attract employees by offering something of value. They both get rich by making other people’s lives better. Therefore, the wealth that CEOs amass in the markets is no less admirable than Saquon Berkeley’s wealth, even if it is less visible.
