a house suitable to raise a small family in London, an MP on an MP’s salary could not get a mortgage on that, they would need some other source of funds
There are powerful non-monetary incentives to be in Parliament. Since UK law requires all government ministers to be MPs, most of the most powerful 500 people in the UK are MPs.
Many people find power to be very intoxicating even if one of the conditions for holding that power is that it is illegal to convert that power into personal wealth.
But the same analysis does not apply to the other 99.999% of jobs in the UK, so it would be nice if you could come up with an example population of workers other than MPs. Almost any other population would do. (Rock musician would not do because there are powerful non-monetary incentives to being a male rock musician because many young women find rock musicians extremely attractive.)
Are the rates of having high personal wealth lower in the US than in the UK? I doubt it is much lower. So if (as you claim) it is the presence of high-net-worth individuals in the labor market that keeps salaries low in the UK, then why is the mechanism you claim is operating in the UK so much weaker in the US? That is, why are US salaries, particularly for jobs in computing and AI, much higher than UK salaries?
Do you claim that the same mechanism operates in other markets or is it restricted to the labor market? For example, do high-net-worth individuals on average pay more for the same car as a no-net-worth individual because they can afford to pay more? Do high-net-worth individuals sometimes pretend to be no-net-worth individuals when talking to car salesmen to get a better price? It seems to me that they almost never bother doing that because they don’t have to because the salesman (and the car dealership he works for) regards one pound as just as desirable as any other pound regardless of the wealth status of the person giving them the pound. There a people who hold an animus towards wealthy people, but even such a person if employed as car salesman will almost always care much more about making a sale (and consequently earning a commission on that sale) than on disadvantaging the wealthy person or making the wealthy person suffer a little. Increasing personal income is just a much more compelling consideration than most considerations for the average person.
Would the cost of a particular make and model of car in country X or city X be lower if no one in country X or city X had any savings? My guess is no. It costs Y pounds to make the car, so that Y pounds acts as a strict lower bound on the average selling price of the car. A seller would like the average selling price to be as high as possible, but buyers are price sensitive, so if the seller’s price is higher than the price of another seller of the same make and model of car, buyers will just buy from the other seller till the other seller gets low on inventory and the prices equalize. These are the main 2 mechanisms determining the prices of cars, and I don’t see how the net worth of the buyers affects these mechanisms in any significant way.
I always thought the labor market works basically the same way: if employer A is willing to pay salary X to job Y and additionally if employer B stubbornly refuses to pay more than 0.9X, then pretty soon employer B will be unable to hire any employees willing and able to do Y, so the salaries offered by A and B will tend to equalize (unless for example B’s workplace is much easier to commute to than A’s or some other factor, but all of these factors tend to be minor factors relative to salary).
I expect wealthy people to care about salary, too, such that as long as employer B stubbornly refuses to pay more than 0.9X, it will find it difficult to hire even the very wealthiest people. People don’t stop wanting more money just because they already have a lot of money. If you ask people in a survey how much income would they need to be happy, they answer about 30% more than their current income regardless of whether their current income is 10,000 pounds a year, 20,000, 40,000, 80,000 or 160,000.
If the salaries A and B are willing to pay get high enough, then people who previously never considered being a Y will start considering it and start acquiring the necessary qualifications. Also, if the economy changes such that the products of A and B no longer command as high a price as they once did, then the amount A and B are able to pay for labor used in the production of those products must go down.
Again I always thought that this is the basic dynamics by which salaries are set, and again I fail to see how the average net worth of the employees and job applicants affects the dynamics significantly. In fact, the largest effect (although not particularly large) I imagine is its raising salaries because there are unavoidable aversive aspect to holding down most high-paying jobs, and people of wealth will tend to choose to avoid those aversive aspects by taking themselves out of the market for those jobs, requiring employers to raise salaries (at least a little) to attract sufficient numbers of applicants.
It’s a long winded topic but my general feelings are some mixture of:
the US celebrates capitalism in a way that the UK doesn’t and so the market and workers are actually just more competitive in general. ask the guy in the rural petrol (gas) station about business in the US and he will probably perk up. ask a reasonably middle class person in the UK and they will kind of flinch as if we just don’t do that kind of ambition here.
older country with more established class system
smaller country with worse building restrictions
more centralised around London
Bear in mind that I’m not talking about absolute wealth but in comparison to salaries e.g. does work buy you the ability to work less at some point or is it tightly bound around minimum cost of living
edit: re the car thing; more like high NW families have actual family houses and low NW families rent flats, cars are irrelevant expenses unless you look at clearly silly things like a ferrari
There are powerful non-monetary incentives to be in Parliament. Since UK law requires all government ministers to be MPs, most of the most powerful 500 people in the UK are MPs. Many people find power to be very intoxicating even if one of the conditions for holding that power is that it is illegal to convert that power into personal wealth. But the same analysis does not apply to the other 99.999% of jobs in the UK, so it would be nice if you could come up with an example population of workers other than MPs. Almost any other population would do. (Rock musician would not do because there are powerful non-monetary incentives to being a male rock musician because many young women find rock musicians extremely attractive.)
Are the rates of having high personal wealth lower in the US than in the UK? I doubt it is much lower. So if (as you claim) it is the presence of high-net-worth individuals in the labor market that keeps salaries low in the UK, then why is the mechanism you claim is operating in the UK so much weaker in the US? That is, why are US salaries, particularly for jobs in computing and AI, much higher than UK salaries?
Do you claim that the same mechanism operates in other markets or is it restricted to the labor market? For example, do high-net-worth individuals on average pay more for the same car as a no-net-worth individual because they can afford to pay more? Do high-net-worth individuals sometimes pretend to be no-net-worth individuals when talking to car salesmen to get a better price? It seems to me that they almost never bother doing that because they don’t have to because the salesman (and the car dealership he works for) regards one pound as just as desirable as any other pound regardless of the wealth status of the person giving them the pound. There a people who hold an animus towards wealthy people, but even such a person if employed as car salesman will almost always care much more about making a sale (and consequently earning a commission on that sale) than on disadvantaging the wealthy person or making the wealthy person suffer a little. Increasing personal income is just a much more compelling consideration than most considerations for the average person.
Would the cost of a particular make and model of car in country X or city X be lower if no one in country X or city X had any savings? My guess is no. It costs Y pounds to make the car, so that Y pounds acts as a strict lower bound on the average selling price of the car. A seller would like the average selling price to be as high as possible, but buyers are price sensitive, so if the seller’s price is higher than the price of another seller of the same make and model of car, buyers will just buy from the other seller till the other seller gets low on inventory and the prices equalize. These are the main 2 mechanisms determining the prices of cars, and I don’t see how the net worth of the buyers affects these mechanisms in any significant way.
I always thought the labor market works basically the same way: if employer A is willing to pay salary X to job Y and additionally if employer B stubbornly refuses to pay more than 0.9X, then pretty soon employer B will be unable to hire any employees willing and able to do Y, so the salaries offered by A and B will tend to equalize (unless for example B’s workplace is much easier to commute to than A’s or some other factor, but all of these factors tend to be minor factors relative to salary).
I expect wealthy people to care about salary, too, such that as long as employer B stubbornly refuses to pay more than 0.9X, it will find it difficult to hire even the very wealthiest people. People don’t stop wanting more money just because they already have a lot of money. If you ask people in a survey how much income would they need to be happy, they answer about 30% more than their current income regardless of whether their current income is 10,000 pounds a year, 20,000, 40,000, 80,000 or 160,000.
If the salaries A and B are willing to pay get high enough, then people who previously never considered being a Y will start considering it and start acquiring the necessary qualifications. Also, if the economy changes such that the products of A and B no longer command as high a price as they once did, then the amount A and B are able to pay for labor used in the production of those products must go down.
Again I always thought that this is the basic dynamics by which salaries are set, and again I fail to see how the average net worth of the employees and job applicants affects the dynamics significantly. In fact, the largest effect (although not particularly large) I imagine is its raising salaries because there are unavoidable aversive aspect to holding down most high-paying jobs, and people of wealth will tend to choose to avoid those aversive aspects by taking themselves out of the market for those jobs, requiring employers to raise salaries (at least a little) to attract sufficient numbers of applicants.
It’s a long winded topic but my general feelings are some mixture of:
the US celebrates capitalism in a way that the UK doesn’t and so the market and workers are actually just more competitive in general. ask the guy in the rural petrol (gas) station about business in the US and he will probably perk up. ask a reasonably middle class person in the UK and they will kind of flinch as if we just don’t do that kind of ambition here.
older country with more established class system
smaller country with worse building restrictions
more centralised around London
Bear in mind that I’m not talking about absolute wealth but in comparison to salaries e.g. does work buy you the ability to work less at some point or is it tightly bound around minimum cost of living
edit: re the car thing; more like high NW families have actual family houses and low NW families rent flats, cars are irrelevant expenses unless you look at clearly silly things like a ferrari