If Every Worker in America Earned the Same Paycheck, What Would Happen to the Economy?

Yahoo

6 days ago

Imagine an America where the CEO of a tech giant takes home the same salary as a grocery store cashier. Where software engineers, janitors, teachers and hedge fund managers all earn the exact same paycheck. It's a radical idea, and one that's gaining attention thanks to people like Madeline Pendleton, founder of Tunnel Vision, a clothing company where every employee, including Pendleton herself, is paid the same wage. Profits are shared, and there's a five-year plan to distribute ownership equally.
It's an especially compelling idea when you consider that most working Americans are struggling to get by, while CEOs were paid 351 times as much as the typical worker in 2020, according to the Economic Policy Institute. But what would happen if this model were scaled up, not just to one business, but to the entire U.S. economy?
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The short answer: The results would be complicated, and maybe even chaotic. Chris Motola, a financial analyst with NationalBusinessCapital.com, explains that the impact of every worker in the U.S. drawing the same salary is very different than every worker within a single company drawing the same salary.
'A socialist company like Tunnel Vision is still competing within a capitalist economy,' he said. 'Blown out to the national level, this technically wouldn't even be socialism, but a strictly enforced compensation regime.'
Pendleton's model thrives partly because it exists within capitalism. Her employees benefit from equitable treatment and profit-sharing, but the business still competes on the open market. When you remove individual compensation differences across the entire workforce, say, by mandating a single national wage, it changes everything.
What Happens to Motivation and Performance?
One of the biggest challenges in a flat-pay society is motivation. If no matter how hard (or little) you work, you earn the same as everyone else, what's the incentive to go above and beyond?
'The immediate question is, 'How would such a society provide extrinsic motivation if it can't offer different levels of financial compensation to workers at the individual level?'' Motola said.
He proposes a few scenarios. One is to treat the nation like a giant corporation, where GDP gains and sovereign wealth fund profits are distributed as bonuses, meaning everyone is a stockholder. Another is to provide nonfinancial incentives like status, land or flexibility.
But both ideas raise further questions: Who decides who gets what perks? What keeps people from burning out when their extra effort brings them no extra pay?
'High performers and low performers would receive the same compensation, however, which could lead to resentment and burnout,' Motola noted.
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Would Markets Still Exist?
Even in a flat-pay society, people would likely still want to build wealth. If investment and ownership remain possible, a new class divide could simply emerge between those who invest wisely and those who don't (or can't afford to).
'Does the market still exist? Can people still invest? If so, investors could potentially earn a higher income beyond their salary,' Motola pointed out.
So even if salaries were equal, inequalities could persist, just in different forms. Capital investment, property ownership and other private ventures might become the new dividing lines.
The End of the Hustle Economy
One immediate effect of wage flattening could be the collapse of the hustle economy. No more side gigs for extra income, because everyone already earns the same. That might sound great to burned-out workers, but it could also stifle innovation.
Still, there's potential upside: more collaboration and less competition. Without the pressure to outperform for promotions or raises, people might focus on meaningful work, not just lucrative work.
Slower, but Possibly Fairer Decision-Making
A national flat-pay system would likely eliminate traditional corporate hierarchies, or at least remove pay as the incentive for climbing them.
'The main value proposition of hierarchy, including economic hierarchy, is that it provides a quicker, more efficient decision-making apparatus than resolving things by committee,' Motola said. 'The flipside is that a bad despot can do far more damage than a bad committee.'
With equal pay, leadership roles may still exist but they'd be chosen for trust or skill, not compensation. That could lead to slower processes but potentially more democratic workplaces.
Utopian or Unworkable?
Ultimately, paying every worker in America the same salary would require a fundamental restructuring of how we define value, ambition and success. Changing every worker's salary to a flat rate would go well beyond payroll. It would require a fundamental reset of cultural norms around value, ambition and success.
Pendleton's Tunnel Vision proves that an equal-pay model can work on a small scale, with buy-in from everyone involved. But scaling that model to an entire nation? As Motola put it, 'Long story short: It's an unworkable scenario.'
Still, it's a compelling thought experiment and one that forces us to confront the values embedded in our paychecks, and to ask whether equality always has to come at the expense of incentive, or if we just need a new kind of incentive altogether.
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This article originally appeared on GOBankingRates.com: If Every Worker in America Earned the Same Paycheck, What Would Happen to the Economy?