Economic Rent- The Influential Switch in Excess of Talent and Skill

Updated: Aug 4, 2021

Originally published at https://www.datadriveninvestor.com on November 10, 2019.


Photo by Dids from Pexels

Boy! Did we do a day’s work! They give the job all they’ve got!”- The slogan of Domestic Operations Branch at the Bureau of Special Services from the year 1941 through 1945. Occupation plays a vital role in human life. Doubtless to say is the same for other primates with a variance that, in their case, is not referred to it as “the occupation.” The words- skill and innate talent would suffice in describing their workload. For a human being holding a job brings about providing amenities using skillsets learned and accumulated throughout the lifespan. Upon amassing of skills in an organized bundle, the purpose of facilitating personal recognition within a group, such as profession, specialty or sub-specialty; the humans can create employment rolls by constructing and glamorizing them under a new term referred to as “The title”- like Gardner, carpenter, physician, parenthood, lawyer, engineer, etc.

Some jobs are content by way of the monetary compensation; others remunerated through instinctual gratification and betterment of the life itself and loved ones. Everyone must work utilizing their given mental and physical resources to carry out given career requirements or tasks. Hence must stay employed, volunteer, or independently part as a business. People call for a wide range of skills or abilities that are associated with each occupation. Some may be included under a given designation, but often not! In the real world, what matters are the skill underwritten for the specific occupation depiction for a particular title, even one may be furthermore adept at one or more of skills from an, unlike title. Correct also, the other way around, as one may be presumed skillful for a specific task under a particular heading but conflictingly flops to do to the satisfaction of the recipient, or the amount of money earned exceeds that which is economically, personally or socially essential for that work. For the sake of convenience — every job description emanates with the least level of skill sets. To succeed, we need to keep that degree of aptitude before we are designated as qualified. The way by which the skills are gathered and utilized confide to a grade of competency and ability, called talent.” In theoretic finish an aptitude is the determining factor of quality, hence the value of a deliverable by one person at a given time. An operative would logically be inclined to ruminate. Accordingly, the value of overhaul should be at least proportional to the creativeness of its deliverance to a client or customer and must offer required expertise. But on the reverse side is not the same!

The Microeconomic concept

Besides the microeconomics concept of supply and demand, the economic framework of determining the face value of service in a given market clasps other factors within the existing system. The factors that invariably but artificially influence the values of any skill delivered through a variety of avenues. Considering, Supply and demands as postulated- holding all else equal, in a competitive market, the unit price for a particular good, or other traded items including labor or liquid financial assets, will vary until it settles at a point where the quantity of a service or product at the present value demanded would equal the quantity supplied at the existing price, aiding in an economic counterbalance of price and quantity transacts.

In the world of 21st-century, the sequence of supply and demand are often manipulated heedlessly of how gifted and skillful individuals. This leads us to the notion of reimbursing carefully chosen groups of people holding a given title more than its true face value; also called the economic rent. In this slice; I would like to expand on the value and compensation for the skills.

Occupation and the job market

Employment is indispensable for the responsible, as our lives bank on it to thrive and societies prosper. Unless physical or mental restraints, the occupation will serve as a mode to exchange skills within a society to achieve or have access to services or products that we are not personally capable of attaining. To a greater magnitude, the more finesse we get, the further vantage we hold over others, thence the probability of someone demanding our services would be colossal given the right environment, if we make the deliverable available sprucely and to the optimal satisfaction of clients. Skills make us competitive, where talents give every soul the unique. We all have distinctive dexterity, and such individuality can be appreciated among people with like skill sets. Singularity makes us competitive, and ambition helps us deliver better results each time. Hence, the birth of quality is within a rival environment. In other words, quality is the determination of the way one can offer a service or a product to customers so they appreciate its exceptionalism paralleled to those delivered by others. As previously pointed out; it is regrettable to say- the value does not always adapt to the pattern of the unprecedented outcome. Today the worthiness of a person’s skill is in part the spin-off of sociopolitical influences. As societies move towards stringently organized systems, the legislative upshot of the formation rests within the hands of groups that have consolidated to protect the market and legitimize their vision and mission headed for higher fiscal gain in exchange for analogously scarcer skills. In certain situations, we can’t oversight to witness those getting paid for lower quality oeuvre. Societies, organizations, and consolidations exist today by way of creating their own domain of skill sets. Thence, in one way or another shaped overtly monopolized environs through which they could curb folios of citizenry permitted to learn, arrogate particular skills and give service utilizing the versed skills. Today’s organizations have mastered prompting the base pay for occupations. It’s done by crafting a fictitious environment of supply and demand pliancy; a touch that would so decodes into who should earn more for what!

The disparity between quality and work

Evidently disparity between the quality and quantity of work and how much a person should earn is significant. Perhaps; a general internist by way of skills shoved under its given designation covers a much larger knowledge base and work hours than a dermatologist. Or; a general surgeon may well spend more strenuous workload and hours than an ophthalmologist. Yet the Internist and general surgeons’ compensation are generally lower and much less “lucrative”. By the same grounds those with “lucrative specialty titles and skill set” argue- the higher pay must have got to do with the number of years dedicated to the education as subspecialists. The retort quarrel would be; the high cost of gaining a skill carries the monopoly of its own as it is the topic of a separate discussion. Plus- some engineering and legal professions spend much a lesser amount of time in school and lesser tuition fees; yet earn higher than any physicians out there in the job market.

The major question is the compensation of labor- how much; why on what basis, and system of logic?! — This is the questions that cause to be answered before we can ponder the actual problem.

Although the answers may be apprehensive, historical facts point towards the self-indulgence driven monopoly and control over the economic sovereignty of skilled and talented by those who fear the clarity of competitiveness and value of individual reign. An article published on PayScale not overly long ago describes how the reinforced pay system is for jobs and what encompasses the concept of skill premium. According to the issue source skill premium, also referred to as skill hightail is the divergence between how much someone’s pay is compared to another party when they partake of the same title without sharing the same attainment. The intention is to outline the fact that not all skills need a premium. Also, the value of every skill under different circumstances will variegate from one job to another. Types of skill acquisitions are categorized as; “Assumed” or Skills that necessary for doing a task that companies automatically presume prospect has these skills from the title given; “Essential” (specialized) or must have Skills so candidate come through in a job, but cannot be assumed; “Useful” Skills are not required, but aids to get the job done efficiently and in some other fashion even better; “Irrelevant” Skills are unnecessary for the given job and do not ameliorate the efficiency or execution of the applied job. To explicate further the author of the publication exemplifies the data analyst vs data scientist Roles. In the context acquiring machine learning skills by data, analyst could add $10,500.00 to their compensation. The PayScale categorizes the data analyst mastery under the negative premiums. (fig.1) Author’s assumption in contrary to what some believe companies don’t necessarily ding their workers for having skills that they need but justifies it by the first rule of data analysis. The correlation does not always translate to causation- he said. Instead, correlation is the number one wood of the skill value. The PayScale assumes that the value of skill depends on which intensities are assumed, essential, irrelevant or useful for given positions and the spots they hope to secure in the future.

It’s my understanding, Pay Scale presents another sample suggesting over appositeness of factitious theorem and criteria that rely on abounding variables with complex theoretical accounts resembling fishing from the murky water. Of course; the sophistication of later concept is convincingly impressive to an average bystander, but in reality, flounder to portray the value under failing to expound on the quality of work staged. It uniquely relies on a firm well organized manipulated theory of supply and demand microeconomics.