George Leef’s latest Forbes column examines changes in the way government workers have been compensated.
Does it matter how we compensate government workers? Not just how much, but how? After all, incentives matter in the private sector; what about in public employment?
That is the subject of Against the Profit Motive – The Salary Revolution in American Government, 1780 – 1940 by Nicholas Parrillo, a professor of law at Yale. It’s a fascinating and deeply researched book explores what must be among the least examined aspects of American history — the way compensation for public officials has changed over time.
That might seem to be a subject of scant interest, but Parrillo demonstrates that the shift away from our early system of paying those who did the work of the state (wherein the official’s compensation depended largely on his industriousness) and into paying them flat salaries instead reflected dramatic changes in the relationship between the citizen and the government. Today’s mega-state would never have been possible without the changes in compensation he documents.
In early America, some public officials were paid a salary, such as the president and members of Congress, but most were compensated through what Parrillo terms “facilitative payments.” That is, the individuals in society whom the officials served would directly pay them fees for the work they could do, such as getting government applications processed and permits issued. Those payments weren’t usually set by law, but even when they were, added gratuities for the official to induce more expeditious service were common.
Was that a bad system? It left the door open to price-gouging by avaricious officials, but on the whole, people seemed content with it. Parrillo writes, “The recipient’s freedom to adjust the price and the official’s freedom to adjust the service opened the way for mutual benefit. In the eyes of many, bargaining between officials and recipients was not only convenient, but necessary to the continued functioning of government as the needs of service recipients evolved.”