It does provide clarity, and I can imagine that there are unfortunate cases where those entry level salaries aren’t enough.
As I said elsewhere in this thread, I think this problem would be best resolved simply by asking how much an applicant needs, instead of raising wages accross the board. The latter would cause all kinds of problems. It would worsen the already latent center/periphery divide in EA by increasing inequality, it would make it harder for new organisations to compete, it would reduce the net amount of people that we can employ, etc etc.
But I could be wrong, and I sense that some of my thoughts might be ideologically tainted. If you feel the urge to point me at some econ 101, please do.
The latter seems substantially better than the former by my lights (well, substituting ‘across the board’ for ‘let the market set prices’.)
The standard econ-101 story for this is (in caricature) that markets tend to efficiently allocate scarce resources, and you generally make things worse overall if you try to meddle in them (although you can anoint particular beneficiaries).
The mix of strategies to soft-suppress (i.e. short of frank collusion/oligospony) salaries below market rate will probably be worse than not doing so—the usual predictions are a labour supply shortfall, with the most able applicants preferentially selecting themselves out (if I know I’ll only realistically get $X at an EA org but I can get $1.5X in the private sector, that’s a disincentive, and one that costs the EA org if they value my marginal labour more than X), and probably misallocation issues (bidding up wages gives a mechanism for the highest performers to match into the highest performing orgs).
It’s also worth stressing the “Have a maximum, but ask the applicant to make a first suggestion; don’t disclose wages; discourage employees sharing their salary with other employees” isn’t an EA innovation—they are pretty standard practice in salary negotiation on the employer side, and they conspire to undermine employee bargaining position. Canny employees being confronted with ‘how much do you need?’ may play along with the charade (“I need $10k more for leisure and holidays which are—promise! - strictly necessary to ensure my peak productivity!”) or roll their eyes at the conceit (“So I need $X in the sense you need to offer $X or I won’t take the job”).
Moreover:
‘Paying by necessity’ probably gets into legal trouble in various jurisdictions. Paying Alice more than (similarly situated) Bob because (e.g.) she has kids is unlikely to fly. (More generally, the perverse incentives on taking ‘pay by necessity’ at face value are left as an exercise to the reader).
Heavily obfuscating compensation disadvantages poorer/less experienced/less willing negotiators. I think I remember some data suggesting there are demographic trends in these factors—insofar as it does, it seems likely to lead to unjust bias in compensation.
Typical sentiment is that employees rather than employers are the weaker party, at greater risk of exploitative or coercive practice. I don’t understand why in EA contexts we are eager to endorse approaches that systematically benefit the latter at the expense of the former.
Not trying to push down the ceiling doesn’t mean you have to elevate the floor. People can still offer their services ‘at a discount’ if they want to. Although this still a bad idea, one could always pay at market and hope employees give their ‘unnecessary’ money back to you.
I’m a big fan of having some separation between personal and professional life (and I think a lot of EA errs in eliding the two too much). Insofar as these aren’t identical—insofar as “Greg the human” isn’t “Greg the agent of his EA employers will”, interests of (EA) employer and (EA) employee won’t perfectly converge: my holiday to Rome or whatever isn’t a ‘business expense’; the most marginal activity of my org isn’t likely to be the thing that I consider the best use of my funds. Better to accept this (and strike mutually beneficial deals) rather than pretending otherwise.
I’d add that I think there’s something to be said in favor of a needs-based model in the early stages of a startup. For as long as you’re heavily funding-constrained, it allows you to hire a greater number of people at a given cost. (This is essentially first-degree price discrimination; maximizing producer’s surplus (≈ altruistic utility) can IMO be a good idea under some circumstances.) One could argue that even then, promising EA startups should (and will) be paid better, but I’m not sure this always works out in practice.
[Raising wages across the board] would cause all kinds of problems. It would worsen the already latent center/periphery divide in EA by increasing inequality, it would make it harder for new organisations to compete, it would reduce the net amount of people that we can employ, etc etc.
But I could be wrong, and I sense that some of my thoughts might be ideologically tainted. If you feel the urge to point me at some econ 101, please do.
I think you’re right that these problems in would occur if a handful of orgs with the most money started raising salaries across the board in the current environment. But a commenter on FB summed up my econ 101 read on this perfectly (to reiterate I’m not an economist): “If the community can’t afford market rates maybe it’s time to start admitting that the community is funding constrained.”
It does provide clarity, and I can imagine that there are unfortunate cases where those entry level salaries aren’t enough.
As I said elsewhere in this thread, I think this problem would be best resolved simply by asking how much an applicant needs, instead of raising wages accross the board. The latter would cause all kinds of problems. It would worsen the already latent center/periphery divide in EA by increasing inequality, it would make it harder for new organisations to compete, it would reduce the net amount of people that we can employ, etc etc.
But I could be wrong, and I sense that some of my thoughts might be ideologically tainted. If you feel the urge to point me at some econ 101, please do.
The latter seems substantially better than the former by my lights (well, substituting ‘across the board’ for ‘let the market set prices’.)
The standard econ-101 story for this is (in caricature) that markets tend to efficiently allocate scarce resources, and you generally make things worse overall if you try to meddle in them (although you can anoint particular beneficiaries).
The mix of strategies to soft-suppress (i.e. short of frank collusion/oligospony) salaries below market rate will probably be worse than not doing so—the usual predictions are a labour supply shortfall, with the most able applicants preferentially selecting themselves out (if I know I’ll only realistically get $X at an EA org but I can get $1.5X in the private sector, that’s a disincentive, and one that costs the EA org if they value my marginal labour more than X), and probably misallocation issues (bidding up wages gives a mechanism for the highest performers to match into the highest performing orgs).
It’s also worth stressing the “Have a maximum, but ask the applicant to make a first suggestion; don’t disclose wages; discourage employees sharing their salary with other employees” isn’t an EA innovation—they are pretty standard practice in salary negotiation on the employer side, and they conspire to undermine employee bargaining position. Canny employees being confronted with ‘how much do you need?’ may play along with the charade (“I need $10k more for leisure and holidays which are—promise! - strictly necessary to ensure my peak productivity!”) or roll their eyes at the conceit (“So I need $X in the sense you need to offer $X or I won’t take the job”).
Moreover:
‘Paying by necessity’ probably gets into legal trouble in various jurisdictions. Paying Alice more than (similarly situated) Bob because (e.g.) she has kids is unlikely to fly. (More generally, the perverse incentives on taking ‘pay by necessity’ at face value are left as an exercise to the reader).
Heavily obfuscating compensation disadvantages poorer/less experienced/less willing negotiators. I think I remember some data suggesting there are demographic trends in these factors—insofar as it does, it seems likely to lead to unjust bias in compensation.
Typical sentiment is that employees rather than employers are the weaker party, at greater risk of exploitative or coercive practice. I don’t understand why in EA contexts we are eager to endorse approaches that systematically benefit the latter at the expense of the former.
Not trying to push down the ceiling doesn’t mean you have to elevate the floor. People can still offer their services ‘at a discount’ if they want to. Although this still a bad idea, one could always pay at market and hope employees give their ‘unnecessary’ money back to you.
I’m a big fan of having some separation between personal and professional life (and I think a lot of EA errs in eliding the two too much). Insofar as these aren’t identical—insofar as “Greg the human” isn’t “Greg the agent of his EA employers will”, interests of (EA) employer and (EA) employee won’t perfectly converge: my holiday to Rome or whatever isn’t a ‘business expense’; the most marginal activity of my org isn’t likely to be the thing that I consider the best use of my funds. Better to accept this (and strike mutually beneficial deals) rather than pretending otherwise.
I’d add that I think there’s something to be said in favor of a needs-based model in the early stages of a startup. For as long as you’re heavily funding-constrained, it allows you to hire a greater number of people at a given cost. (This is essentially first-degree price discrimination; maximizing producer’s surplus (≈ altruistic utility) can IMO be a good idea under some circumstances.) One could argue that even then, promising EA startups should (and will) be paid better, but I’m not sure this always works out in practice.
Other than that, I agree.
Well put Gregory, you nicely captured a lot of concerns I have about the “pay by (reported) necessity” model.
I think you’re right that these problems in would occur if a handful of orgs with the most money started raising salaries across the board in the current environment. But a commenter on FB summed up my econ 101 read on this perfectly (to reiterate I’m not an economist): “If the community can’t afford market rates maybe it’s time to start admitting that the community is funding constrained.”