Ways Workers Are Underpaid
There are three ways that a worker – call him Joe – can legitimately be said to be underpaid. One way – the way that is identified in modern economics textbooks – is for Joe’s pay (wage plus fringe benefits) to be below the value of his marginal product (“VMP”). If Joe is one of four janitors employed by Acme Inc. and is – like his co-workers – paid $70 per day, Joe is underpaid if his daily contribution to Acme Inc.’s revenues is more than $70. Call this kind of underpayment “Strict Economic Textbook” underpayment.
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