Status anxiety keeps earnings flatter across employees than they would otherwise be

Sunday, July 3rd, 2022

Robert Henderson has been reading Choosing the Right Pond: Human Behavior and the Quest for Status, by the Cornell economist Robert Frank, which addresses the question, Why are the least productive workers in an organization typically paid more than what they produce, while the most productive workers are paid less?

In most organizations, productivity varies more across employees doing similar jobs than wages.

In other words, if you take a selection of workers in an office who are all earning $80k/year, what is the likelihood they are all producing the same amount of value for the firm?

Basically zero.

Moreover, the highest-ranked employees are typically paid less than what they contribute. And the bottom-ranked workers are paid more.


Robert Frank suggests the reason for this is that workers would generally prefer to occupy higher-ranked positions in their work groups than lower-ranked ones. They’re forgoing more earnings to hold a higher-status position in their organization.


The low-ranked workers are giving up status for money. The high-ranked workers are giving up money for status.


Status anxiety keeps earnings flatter across employees than they would otherwise be.


  1. Jim says:

    More likely what keeps earnings flat across employees is a set of scientific management techniques designed to minimize employee unrest and maximize shareholder value.

  2. Gavin Longmuir says:

    More likely it is a reflection of the difficulty of measuring productivity. We could all tell tales of the high productivity manager who came in, manipulated circumstances to exceed all targets, and was promoted on to bigger & better things — leaving a horrible mess behind her for the next unfortunate person to fix.

    There are not so many jobs in which productivity is easy to measure. Think about the lady at the checkout counter at a grocery store. One lady may be faster in checking out than another; but the second slower checkout lady may have a more pleasant manner, such that the customer comes back to the store and spends more. Which of those two employees is more productive?

  3. John Muir says:

    An example that comes to mind is a unionized shop in which skilled trades can make more than middle management. Management has the ‘Power’, but can be replaced at a moment’s notice, while workers have contractual protections. We have seen this in government as well. Witness dam employees; WG is in a much higher bargaining unit than GS employees on site. In fact they can make money hand over fist doing fire service augmentations, outpacing even the local GM schedules.

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