A recent op-ed in the NYT is by a cafeteria worker at Harvard University, sharing how difficult it is to live on the $31k salary in the Boston area. Even though she admits that Harvard pays more than other cafeterias in the region, she points out that with a $35 billion dollar endowment, they could easily afford to pay their workers more.
Other such stories have been written about adjunct professors at other universities who struggle to pay the heating bills in winter, or security staff at companies like Google or Facebook who are sleeping in their cars.
The economic orthodox response to such claims are that these workers are being paid at a rate at which demand matches supply and companies have no obligation to their workers beyond that point. And that while it may seem heartless, articles like the one above are preying on emotional sensitivity to push bad policy.
However, I do think there’s a valid argument in support of this as well. I’ve been privy to the financials of tech companies similar to Facebook/Google and their payroll costs are overwhelmingly dominated by six figure salaries to highly skilled workers. In cases like this, increasing the pay for their lowest level staff would not meaningfully affect their margins. I imagine the cost structure at Harvard is somewhat similar and this would also not be a huge hit to their endowment. This is distinctly different from businesses like Walmart where the bulk of their labor force is working for close to minimum wage and any attempts to raise their pay would result in serious economic repercussions.
Harvard is also different from Facebook/Google in that it’s a non-profit and doesn’t have a duty towards stockholders. In such a case, I think the argument is even stronger that they should be looking at something much broader than just pure supply and demand when determining the wages of their workers.
This is one of those arguments though where I believe both sides have a lot of legitimate points so I’d be curious to hear what others’ perspectives on this are.