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October 18, 2005


Paddy Carter

how interesting.

I wonder, though, whether being very highly paid is the same as being under pressure or concentrating to hard?

It's one thing to be confronted with a "get this right and you win millions" moment, but it is another to be sat there on a fat salary, and severance package etc. for taking lots of lunches and writing motivational emails to your staff.

Rather than putting me under pressure, I imagine I might find it quite relaxing - I'm loaded whatever happens.

Perhaps CEO's need such obscene pay packets because they perform better once they're relaxed?

Dr. angry economist

I ain't read the papers you mentioned - interesting in that, rather than diminishing returns to incentives that then flatten so there's no further returns from additional incentives, its a U shaped relationship where at the break point it becomes an inverse relationship.

Paddy's point above I can chime with slightly. e.g. if I am sitting in a $1m a year job (which I am not, as it happens, even including my public sector final salary scheme which too many folks seem to object to for some reason) then if I am of a certain age and experience, I pretty much know I can get a new job with the same or more pay. I.e. I am in that kind of salary ball park now and this sends signals in the labour market that I should be paid this, whether worth it or not.

I see this kind of thing in work every day, and even find myself thinking a bit the same (although try knocking a few zeros off), but at the same time actually working quite hard and effectively of course. Unless I am responding to blogs.

Andrew Duffin

I suspect that, with the taxi drivers, they know how much they need to "clear" each day to support their living expenses. A little more is nice, but once they've got that then the feeling is that anything more will just be "working for the taxman" - especially if it tips (oop npi) them over into a higher tax bracket. So they stop. Certainly that chimes with my experience of supervising hourly-paid employees. Beyond a certain point overtime is hard to sell - "I'd be into 40% if I did that shift - no thanks."

Paddy Carter

Andrew if you're talking about London cabbies they're into the 40% by about June aren't they?


"big salaries paid to chief executives are due [to]" : didn't Galbraith say something to the effect of their being due to an entirely sincere sense of self-regard?

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