Who would pay us?

A Facebook friend recently asked, “If everyone worked for the government (as some people are suggesting) then who would pay our salaries?”

I have not heard this suggestion, but it is interesting. If indeed we all worked for our government, the government would pay our salaries. Since we have a democracy, a “government of the people and by the people and for the people,” we would all be working for ourselves and paying ourselves.

Governments that are not democratic usually have a monarch or some monopoly that owns everything, and individuals do commerce by permission or charter. It still appears to workers that they work for whoever hands them money on payday, but that person is a middle-man with a charter or lease from the king. All persons work for and at the pleasure of the king. This arrangement is what Adam Smith was looking at when he wrote The Wealth of Nations and explained that wealth was not accumulated money sitting in the king’s treasure rooms, but rather was money that was moving through the economy from hand to hand to hand, earned and spent sequentially by many people in the pursuit of their ambitions and dreams.

In any case, the person who has a job is the person who is making the money as well as the person who is getting paid. The employee is “making the money” for the employer. The employer uses the money that the employees make to pay each worker’s salary and benefits, to pay applicable taxes, and to maintain and furnish workplace necessities. What is left over after these expenses is profit for the owner or owners, investors and capitalists, people who ideally pump that money back into business in the hope of making more profits. If they put it in their treasure rooms, it is drained out of the market and the market is diminished.

So each employee earns a salary by making money for the employer. Successful employers are usually hard-working, hard-headed practical ambitious people who know that their income depends upon employees, customers, suppliers, and clients. Employees depend upon the employer to understand and adjust to the market and to keep designing the work and the product so that everybody in the system keeps their job and makes a living.

Nobody in the system requires charity from anybody else in the system. It is a cooperative effort in which members owe each other respect and considerations that keep the system going — salary, benefits, hard work, etc. The employee and employer system in turn depends upon that broad complex of roads, railroads, bridges, communication lines, power lines, safety regulations, police, fire departments, childcare, elder-care, hospitals, health care, financial institutions, laws, courts, schools, worker protections, consumer protections, contracts, etc., that permit people to live with confidence, take risks, innovate, and pursue their dreams.

An economy is not simple, and it is time we learned to look at complexity.

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