What Public Servants Earn

The recent attention paid to judicial salaries on this blog (here, here and here) raises a baseline question. Granted, Supreme Court Justices are underpaid relative to law firm associates and even faculty at leading law schools, but then why are those the relevant comparisons? Consider the following take-home pay numbers:

Chief Justice of the United States: $212,000

Active duty Army sergeant with 4 years of experience: $25,495 (Source here.)

Richard Grasso's 2003 take-home pay as CEO of the NY Stock Exchange: $139,500,000

Grasso was not a government employee as head of the NYSE, but NYSE is a non-profit organization, and thus under New York law, can only pay compensation that is "reasonable" and "commensurate with services provided." Accordingly, Grasso and NYSE are defendants in a civil suit brought by the New York Attorney General to rescind much of his pay. Grasso will certainly argue that these terms must be defined by reference to industry standards, and can point to comparable compensation for CEOs of the firms that list their stocks on the NYSE. (Click here for a list of top-paid CEOs.) It is likely that in making its case against Grasso and NYSE, the NY AG will argue that the NYSE Board was partly in Grasso's pocket and partly incompetent. But beyond that, the case may well come down to a battle of what the relevant standard of comparison should be: Corporate CEOs versus heads of other non-profits such as university presidents.

I can't predict what will happen in the NY litigation, but I can say that our public discourse seems to favor Grasso in at least one sense. The relevant comparison seems always to be market-driven: What could/would this person earn in some other job? Yes, there is an important debate over what exactly the relevant comparison should be: Law firm partner or law school professor? Corporate CEO or university president? But it doesn't seem to occur to anyone to make cross-sector comparisons. Indeed, even the army tries to persuade recruits that its pay for a sergeant is more like $42,376 when you figure in all the benefits like food, housing and medical care. (And that's not even counting additional benefits like free air travel to Iraq and free use of night-vision goggles while on patrol in Baghdad!) Thus, the army explains that total compensation for a job as a sergeant compares favorably with compensation for working as a civilian police officer. Notably, the army does not compare salaries for its sergeants with take-home pay for corporate CEOs or even merely upper-middle-class lawyers.

Why not? Well, for one thing, that would expose our extraordinary income inequality. But more deeply, I think, Americans have so completely accepted the notion of market valuation that (with the notable exception of John Edwards and a few other economic populists) we have lost the vocabulary with which to make or even understand the argument that an army sergeant deserves to be paid more than one three thousandth of what the head of the New York Stock Exchange earns.