The Care Theory of Value
The limits of markets also help explain why we expect workers who provide care services. This expectation, generally though not always fulfilled, makes it difficult for care workers to threaten to withdraw their services; it lowers their bargaining power.
As the COVID-19 pandemic rages through the U.S., many hospitals are laying off or cutting the pay of doctors and nurses, even those working on the front lines. Unable to perform the elective surgeries (including face lifts and knee replacements) that are their best moneymakers, hospitals are taking huge losses on pandemic victims. By one estimate, their COVID-19 treatment costs will exceed reimbursements by about $1800 per case.
You can take this an indictment of market-driven health care, or a simple illustration of the maxim, “nice guys (and gals) finish last.” It also illustrates why most jobs that involve care for other people pay less than other jobs, all else equal.
In conventional economic theory, prices (including wages) are determined by the intersection of supply and demand. In long-run equilibrium, prices should equal the cost of production. One of the important insights of Marxian theory (and this is NOT the labor theory of value) is that wages are influenced by the collective bargaining power of workers as a group.
One important indicator of collective bargaining power is the unemployment rate. The harder it is for you to find a job, the more important it becomes to do exactly what your employer says. Monopoly power also comes into play, because it allows employers the power to set wages at their favored level.
At least three other factors affect the collective bargaining power of different groups of workers:
1) who they are (e.g. their gender, race/ethnicity, citizenship)
2) who consumes the products of their labor (e.g. rich people, poor people, or the public sector)
3) how easy it is to measure and capture the value created by their labor (work that contributes to the public good can not easily be monetized or even quantified).
The pervasive influence of market-centric logic makes point 3 the hardest to explain. The reason that we rely on public institutions, private families, and caring communities as well as markets is because our most important assets– natural assets, ecological services, AND other people–do not have a market price. They are not bought and sold. The limits of markets also help explain why we expect workers who provide care services–regardless of their level of education–to literally care–that is, to be motivated by concern for the wellbeing of others. This expectation, generally though not always fulfilled, makes it difficult for care workers to threaten to withdraw their services; it lowers their bargaining power.
This doesn’t imply that care workers can’t mobilize, unionize, or protest their wages and working conditions. It does imply that it is difficult for them to do so, particularly in a crisis like the one we face today. Some doctors–those that provide easily measured and reimbursable specialty services–earn high salaries. Public health specialists and primary care doctors sit much lower on an earnings spectrum bracketed on the bottom by child care and elder care workers, with nurses and teachers in between. Most care workers pay a penalty relative to others with the same education and experience.
Workers in financial services, by contrast, earn a significant pay premium. And financial service firms vigorously resisted a “fiduciary rule” proposed by the Obama administration that would have imposed a legal “duty of care” on financial advisors, requiring them to act in the best interests of their clients–a costly responsibility. Altruism is apparently an expensive taste.
To bolster my care theory of value, I invoke the words of Warren Buffett, Sage of Omaha, referring to investment strategies. “Price is what you pay; value is what you get.” He just doesn’t have the pronouns quite right for care workers on the front lines today: Value is what you get, but price is what they pay.