Net wealth a poor way to measure worth

20:28, May 17 2012
Joe Bennett

This idea is not my idea, nor is it a new idea. Indeed I have written about it before. But I think it is an idea worth regurgitating, writes Joe Bennett.

Before I regurgitate, however, I would like to introduce the phrase "high net worth individual". It means rich person.

I have nothing against rich people. Of the few I've met, some have been nice, some not, some clever, some not, and one or two have even read a book. But the one thing they have in common is that they don't like being called rich. The word is so unequivocal. Even the sound of it drips money. It inspires envy, resentment. Hence the euphemism "high net worth".

The phrase was invented by people who look after rich people's money. "Hand me your dosh, O rich person, and I shall water it and tend it and make it grow, while trimming a little off for myself. Meanwhile, you can get on with enjoying being a high net worth individual."

What I dislike about the phrase is that it equates wealth with worth. They are not the same thing. Paris Hilton, for example, has vast wealth. But what is she worth? Well, if she came to live with me she would be worth slightly less than my dog because she wouldn't fetch the paper in the morning. Though I would enjoy trying to train her with bits of liver.

Lloyd Blankfein is the chief executive of Goldman Sachs, the investment bank. Last year he earned US$14 million (NZ$18m). Now let's imagine Mr Blankfein decided he'd had enough of investment banking and spent the rest of his days caring for old people in a New Zealand rest home. Would his worth to society have increased or decreased? The question is rhetorical. But he would now be paid about $14 an hour. So in order to earn his former annual salary he would have to care for old people for approximately 500 years.


Chief executives' salaries have soared in recent years. The argument is that good chief executives are rare so you have to pay them a lot. I don't believe it. But I acknowledge that private companies are free to pay their employees whatever they like.

Public entities, however, are not. Yet public entities are increasingly behaving like private ones. Every government ministry, for example, and every city council, now has a highly paid chief executive, even though that is not the right title for what they do. The justification is that the public services are competing with private companies for the best people. Again I am unconvinced. I think there are plenty of good people to go round. And I doubt that Goldman Sachs would be frantic to employ, say, the chief executive of the Ministry of Social Welfare.

The only public service I know anything about is education. Of the following four education workers, which has the greatest worth: a school caretaker, a teacher, a principal or the chief executive of the Ministry of Education? It is not an easy question. A case could be made for each of them.

Now, let's say the caretaker earns $N. In most schools I worked at, a teacher would earn roughly 1.5N and the principal roughly 2.5N. I think that's a reasonable pay scale. It reflects the extra qualifications that a teacher must have and the tough stuff that a principal has to deal with. The chief executive at the ministry, however, earns about 10N. I'm not convinced that's reasonable.

It is implicit in this country that Jack's as good as his master. But in recent years the master's pay has roared ahead of Jack's. All over the Western world the gap between rich and poor has widened. One way to start narrowing it would be with the public services.

I'd like to see it made a rule that the highest-paid person in a public service could be paid only five times what the lowest paid gets. So if the lowest salary was, say, $50,000, the head honcho could earn only $250,000. I'd say $250,000 is worth getting out of bed for.

The few at the top might have to give up second homes. But the many at the bottom might be able to save for a first one. The idea might even catch on in the private sector. I think the public would support such businesses.

What are the chances of this happening? There comes a knock at my door.

"Ah, Ms Hilton, how lovely to see you. Sit."

» Joe Bennett is an English-born travel writer and columnist who lives in New Zealand with dogs. His columns are syndicated in newspapers throughout New Zealand.

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