Bryan Caplan  

If Merit Did Not Exist

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The most strident objection to merit pay is that "merit" is utterly subjective.  It's an interesting claim.  But it's hardly an argument for basing pay on seniority.  The natural implication of the unreality of merit, rather, is that we should simply hire whoever's cheapest.  Why pay extra for imaginary differences?


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COMMENTS (14 to date)
david writes:

To be sympathetic, the argument is that "merit" pay rubrics can be gamed because they are subjective, while seniority is a relatively costly proxy to manipulate. Obviously, the argument concedes that merit is real; the difficulty is in capturing merit in an objective and 'fair' fashion. Somewhere out there is someone denied a deserved promotion for bad reasons, and to protect that person everyone switches to seniority pay instead (regardless of all the people who now reserve undeserved promotions. How's that for Rawls?).

But it's a lousy objection anyway, since good merit rubrics can be designed.

Randy writes:

Reminds me of the "trinity" discussion in Pirsig's "Zen and the Art of Motorcycle Maintenance". How is it that we recognize "merit"?

Tom West writes:

The trouble with merit pay is not that it has to be accurate enough to be better than nothing (which almost any scheme is), but it has to be accurate enough so that the benefits outweigh the substantial costs of

(1) implementing the system and

(2) the loss of efficiency when at least some people spend substantial effort gaming the metrics

(3) the unhappiness created in individual employees when their compensation is based (partially) on factors out of the employee's control (making them feel the system is unfair and thus less likely to work hard)

(4) the disunity that any system of compensation that provides for differential outcomes (that are not 100% in employee control) causes in a workplace (which results in less effort, more backbiting, or protecting oneself, etc).

These four make for a pretty substantial cost that few merit systems can beat. Instead, we tend to use unofficial systems (who gets promoted/fired, etc.) to gain some small portion of the benefits of merit systems while avoiding many of these costs.

Also, I'd worry that merit pay *replaces* professionalism as an incentive. If I'm in the 20th percentile, perhaps I feel that I'm being compensated appropriately for my effort because I'm not earning any merit pay, rather than working to meet the professional standards I feel are expected of me (think the day-care and late fees example.)

Roger Sweeny writes:

One of the problems with the way teachers are presently compensated is that there already is a system of merit pay. Teachers are paid more for taking more education courses.

1. There are indeed substantial costs of implementing this system. The main cost to the teacher is time. Many school systems reimburse all or part of the tuition, and most courses are taken at state schools, so the major cost is born by taxpayers. Without this merit system, there would be significantly fewer resources devoted to ed schools. Of course, if you work at an ed school, or are one of the ed schools' allies in the unions and state education departments, this is something to be fiercely resisted.

2. Time spent on ed courses is time that cannot be used preparing the courses you teach, grading, etc. A mediocre teacher with a lot of ed courses makes more than a good teacher without. The powers that be believe that the courses make you a better teacher. However, the research seems to say "not true." Moreover, if you talk to individual teachers, the median response will be, "I got a couple useful things, but mostly it was a waste of time."

A different system of merit pay could still be pretty bad, but it might be an improvement on the present one. The fact that it would upset so many expectations (on the part of the teachers who have taken or plan to take extra ed courses) and wipe out so many jobs helps explain why change is resisted so strongly.

Daublin writes:

Not to dispute your point, but I have a hard time choking down the presumption that there's no way to discern teaching skill, at least at a coarse level. I agree with David that the issue is more about preventing people from gaming it.

Tutors regularly charge more if they gain a reputation for increasing their students' test scores. They also make more when the students just like them more, or get inspired to study harder for them. Judging tutors on merit is totally normal. Is it really so much harder to judge teachers than tutors?

Looked at another way, suppose principals had more authority to attract good teachers and get rid of ones they don't want. Suppose principals got bonuses when their school does well. Does anyone think the principals would be totally in the dark about which teachers are any good? It's hard to imagine such a clueless leader, but such cluelessness is exactly what is believed by people who think teachers can't be measured.

Phil Nicolai writes:

Remember the distinction between seniority and experience. A teacher with 20 years experience new to a different school system will be at the bottom of the seniority ladder. Unions do not care about experience as a measure of quality, it is just ripping off the junior people because the senior union members can.

Rick Stewart writes:

Merit can't be discerned? That's a ridiculous claim. If everyone in a system simply ranks everyone else in the system, the sum of the rankings will be an incredibly good approximation of actual merit.

The problem is not that merit is subjective, it is that everyone believes they are above average, and doesn't like being told otherwise.

My father was a high school teacher who was paid more because he had both higher amounts of education, and many years in the school system. I highly doubt either made him a better teacher, nor do I believe he was above average. On the other hand, I do believe he supplied the school system with far above average effort. That, however, is not an educational outcome.

Tom West writes:

I have a hard time choking down the presumption that there's no way to discern teaching skill, at least at a coarse level.

I know it's much simpler to attack the outlying opinion that there's no way to even roughly measure merit. But then, almost no-one (outside of a few union spokesmen) ascribes to that position.

The real question is whether the benefits of using such a coarse measurement to reward employees outweighs the various costs, and that's much harder claim to support.

The results don't just have to be better than no merit pay, they have to be *much* better than no merit pay.

(Normally, this comes up when there's another bureaucratic measure taken to get more data because more data is obviously better than less data. Wrong! More data has to be a *lot* better than less data to justify all the costs of gathering that data. Something management often seems to forget!)

mark writes:

The merit system(industrial warehouse) I am familiar with is almost wholly objective but still can and is gamed. Simply put, if isn't measured, it isn't done and it is hard to measure everything. Middle managers mostly know this because they have done the work and know the short cuts. Upper management hasn't done the work and is more invested in the merit system because it allows them to have an objective number to make their decisions for them. They don't have to interact with the workers and frankly, I think some of the managers are intimidated by the workers anyway. Rick Stewart's merit system is interesting and I think it would be accurate but why would it be accurate? I would probably rank the employees I perceive to be intelligent and contentious higher but the actual data I would have for their contentiousness would be scant. Many things go on in my busy workplace and I don't see 99% of it. I think my hunches would be accurate but maybe I would just be deceiving myself about the qualities a good worker has. Lastly, anger about rankings causing increased turnover. Well that might be viewed as a feature and not a bug.

mark writes:

"merit" is utterly subjective"

But what intangible isn't? It's inherent in any statement about an intangible that the content of what you are talking about is debatable and not wholly definable. "Value" and "worth" and "fairness" are as subjective as anything else. Even a concept like "market value" merely refers to a set of subjective opinions (those of the buyer and the seller) on top of certain heuristic assumptions (about what the relevant "market" is).

Dan Weber writes:

Most adult professionals work under entirely subjective measures of merit. And most of them seem perfectly happy.

It's really really hard to evaluate software engineers. It makes teacher evaluation look like a simple matter. Yet most software companies manage to compensate their employees in a way that the productive ones don't feel put upon or taken advantage of. A portion of that may be non-monetary compensation, like not getting the crap projects.

(I do have experience with one software company that had the same salary for everyone. It didn't end well, but that's not necessary the determining factor, since there were a lot of things at work.)

Dan Weber writes:

Most adult professionals work under entirely subjective measures of merit. And most of them seem perfectly happy.

It's really really hard to evaluate software engineers. It makes teacher evaluation look like a simple matter. Yet most software companies manage to compensate their employees in a way that the productive ones don't feel put upon or taken advantage of.

(A portion of that may be non-monetary compensation, like not getting the crap projects.)

Roger Sweeny writes:

Phil Nicolai,

The fact that seniority is system-based is a reason many administrators like it. It makes for a pretty stable work force. Any teacher tempted to go elsewhere knows that he or she risks a pay cut by doing so.

s. Keller writes:

I believe merit pay can be both a good and bad way of paying employees. In some industries, seniority is the best system to pay someone because the employee’s tenure in a company shows their ability to be a valuable employee to the company. A perfect example would be some type of manufacturing plant where promotions and pay are both based on how long an employee is there. Many manufacturing employees start out at the bottom of the company but as they continue to work there and build up seniority the more their pay increases and the better positions they get promoted to such as supervisor.
Merit pay can be a bad way to pay employees as well for different reasons. Some employees may have a shorter tenure within a company but have better skills for a position than a senior employee. This makes it hard for employers because if a merit system is in place in the company how can they choose the younger but highly skilled worker for a promotion. This is why industries that have more specialized types of labor shouldn’t employ a merit pay system. If younger workers have better quality of skills than older workers than they should be able to get better positions because they are more qualified to handle the job.

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