Lifestyle - Proximity is key to raking it in

Santosh Desai

Why do schoolteachers get paid a pittance and bankers get million dollar severances? Why do IIM graduates get higher starting salaries than the
salaries earned after 20 years of teaching by the very professors who taught them and made them worthy of being hired in the first place? Will bankers now earn less given that their irresponsibility has landed the entire world in a financial crisis without parallel?

The answer to the first two questions is not easy, but we all know the answer to the third. Bankers will continue to earn in figures beyond the comprehension of most normal people, even if their culpability in the present situation is without question. What is more, they will receive bailouts from the rest of the tax payers so that they can continue to earn their stratospheric commissions. Market forces work very well, except when it comes to the market itself, it would seem.

But it does beg a larger question. On what basis do we get paid for the work we do? What determines the monetary worth that our toils merit?

It is clear that work involving our bodies gets us lower salaries than the work that involves our minds unless one is a model, filmstar or athlete. IIM graduates earn so much because it takes a lot of mental ability to get into these management schools. We spend so much time and effort studying, so it is only fitting that the brightest among us get paid the most.

Now this would be a good explanation if it were true. But the truth is that the brightest minds gravitate to academic institutions where the salaries, particularly in India, are a joke. Scientists and research scholars doing cutting edge, original work get paid nothing whereas food stylists who dress up ice-cream with shaving cream so that it looks appetizing in a commercial get by quite comfortably.

Expertise does not necessarily translate into money. More tellingly, the reverse is also true. It is clear now that most of our so-called financial experts have all the foresight of crystal ball gazers in a country fair. The stock market has been revealed to be little more than a vast collective rumour driven by greed and fear. What they are getting paid is not for their skill but for their vantage point. They are closest to the point where money makes money. They become instruments of multiplication by virtue of their location.

The power of financial market players is alchemic; they make money out of nothing. Unlike traditional industry where assets are built out of some durable value being provided, financial markets make money by creating and filling temporary gaps.

We get paid not for what we do, but for where we are. Salaries are all about location; the closer one is to money, the more of it one makes. Like the arms dealer who makes a few hundred million dollars for putting the right people in touch with each other, the key is proximity to money. Schoolteachers and college professors sit very far from money, so no matter how much their personal ability or how much value they add to our lives, they earn what they do. The market is impatient with distance; it discounts one's worth, the further one gets from it.

The public sector is particularly unfortunate for it engages in the same business that the private sector does but lives in a non-monetized world. Since it is not driven by the market, it does not value work in quite the same way. So the policeman not only ekes out a miserable living but is roundly cursed by all for augmenting his income by other means. A security guard in a pretend uniform makes more than a constable with 20 years of experience.

Many years ago, fresh out of management school, I remember telling my aunt how much I earned. It was a pittance compared to what management graduates earn today. Even so, her genuinely bewildered question to me was, 'What exactly do you do to earn so much?'

It was and continues to be a good question.