While there's some truth in this article, there's a <i>lot</i> of confusion as well.<p>Edward McClelland claims that "the laws of the free market", differing compensation for different types of work, and for work of differing degrees of unpleasantness and risk, should be compensated equally. While there are some within present economic circles who'd argue that, if you go back to Adam Smith (insufficiently read by either economists <i>or</i> their critics), you'll find he actually expands at some length on this in Chapters VIII and X of Book I of <i>The Wealth of Nations</i>. Edited for length (the 18th century was a time of considerably more leisurely writing...).<p>The precis: general wage levels should cover the basic needs of survival, and are established by whether or not general employment is growing, steady, or declining, with the favorability to labor being best in the first and worst in the last case. Compensation for specific types of works varies according to five factors identified by Smith: agreeableness of the work (which reduces pay), cost of acquiring a skill (which increases it), regularity of employment (decreases), trust required of the worker (increases), and the probability of success (less risk: lower reward).<p>Incidentally, this answers the question of why college professors are relatively poorly paid ("If you're so smart, why aren't you rich?"): while the job requires considerable education, it's agreeable, <i>highly</i> regular, relatively low on the trust metric, and (for tenured positions) carries very low risk. And hence: the pay is adequate, but generally modest. Back to Smith....<p>First, Chapter VIII notes that it's the increase or decrease in the economic output of a country, <i>not</i> its total size, which sets the prevailing wage rate. A smaller economy growing faster than a larger one will pay better yet have lower prevailing prices. Smith also notes that pay must always be sufficient to cover living expenses, a point somewhat lost on WalMart and McDonalds of late:<p><i>A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more, otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation....</i><p><i>There are certain circumstances, however, which sometimes give the labourers an advantage, and enable them to raise their wages considerably above this rate, evidently the lowest which is consistent with common humanity.</i><p><i>When in any country the demand for those who live by wages, labourers, journeymen, servants of every kind, is continually increasing; when every year furnishes employment for a greater number than had been employed the year before, the workmen have no occasion to combine in order to raise their wages. The scarcity of hands occasions a competition among masters, who bid against one another in order to get workmen, and thus voluntarily break through the natural combination of masters not to raise wages....</i><p><i>It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour. It is not, accordingly, in the richest countries, but in the most thriving, or in those which are growing rich the fastest, that the wages of labour are highest.</i><p>In Chapter X, wage differentials by type of work:<p><i>The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others. First, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them.</i><p><i>First, the wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness, of the employment. Thus in most places, take the year round, a journeyman tailor earns less than a journeyman weaver. His work is much easier. A journeyman weaver earns less than a journeyman smith. His work is not always easier, but it is much cleanlier....</i><p><i>Hunting and fishing, the most important employments of mankind in the rude state of society, become, in its advanced state, their most agreeable amusements....</i><p><i>Secondly, the wages of labour vary with the easiness and cheapness, or the difficulty and expense, of learning the business.</i><p><i>When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits. A man educated at the expense of much labour and time to any of those employments which require extraordinary dexterity and skill, may be compared to one of those expensive machines....</i><p><i>The difference between the wages of skilled labour and those of common labour, is founded upon this principle....</i><p><i>[I]n order to qualify any person for exercising the one species of labour, ... [custom imposes] the necessity of an apprenticeship.... During the continuance of the apprenticeship, the whole labour of the apprentice belongs to his master. In the meantime he must ... be maintained by his parents or relations... Some money, too, is commonly given to the master..... [O]n the contrary, the labourer, while he is employed about the easier, learns the more difficult parts of his business... It is reasonable ... [that] the wages of mechanics, artificers, and manufacturers, should be somewhat higher than those of common labourers.... This superiority, however, is generally very small: the daily or weekly earnings of journeymen in the more common sorts of manufactures ... are, in most places, very little more than the day-wages of common labourers. Their employment, indeed, is more steady and uniform, and the superiority of their earnings, taking the whole year together, may be somewhat greater.... Education in the ingenious arts, and in the liberal professions, is still more tedious and expensive. The pecuniary recompence, therefore, of painters and sculptors, of lawyers and physicians, ought to be much more liberal; and it is so accordingly.</i><p><i>Thirdly, the wages of labour in different occupations vary with the constancy or inconstancy of employment....</i><p><i>A mason or bricklayer ... can work neither in hard frost nor in foul weather... What he earns, therefore, while he is employed, must not only maintain him while he is idle, but make him some compensation for those anxious and desponding moments [he awaits employment]...</i><p>[Any contractor should be familiar with this circumstance ... Ed]<p><i>When the inconstancy of employment is combined with the hardship, disagreeableness, and dirtiness of the work, it sometimes raises the wages of the most common labour above those of the most skilful artificers. A collier working by the piece is supposed, at Newcastle, to earn commonly about double [or more] ... the wages of common labour ... [arising] altogether from the hardship, disagreeableness, and dirtiness of his work....</i><p><i>Fourthly, the wages of labour vary according to the small or great trust which must be reposed in the workmen.</i><p><i>The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen ... on account of the precious materials with which they are entrusted.... Such confidence could not safely be reposed in people of a very mean or low condition....</i><p>[Entrepreneurs pay attention to the next .. Ed]<p><i>Fifthly, the wages of labour in different employments vary according to the probability or improbability of success in them.</i><p>*The probability that any particular person shall ever be qualified for the employments to which he is educated, is very different in different occupations.... In a perfectly fair lottery, those who draw the prizes ought to gain all that is lost by those who draw the blanks. In a profession, where twenty fail for one that succeeds, that one ought to gain all that should have been gained by the unsuccessful twenty.<p><a href="http://www.gutenberg.org/files/3300/3300-h/3300-h.htm" rel="nofollow">http://www.gutenberg.org/files/3300/3300-h/3300-h.htm</a>