Apple has recently come under fire for the low wages paid to its retail employees, the sales "specialists" and technical support "geniuses." According to a recent New York Times article, Apple is doing something "unique in the annals of retailing". It pays "a modest hourly wage, and no commission, to employees who typically have college degrees and who at the highest performing levels can move as much as $3 million in goods a year."
Undergraduate students learn that, in a competitive market, wages are equal to the marginal value product of labour, that is, the dollar value of what the marginal worker produces. Formally, w=p*MPL where w=the wage rate, p=the price of output and MPL is the marginal product of labour.
The proof of this proposition is simple: if an additional worker produces goods and services worth, say, $12, and the wage rate is, say, $10, hiring more workers adds to the firm's profits. Thus, if the marginal value product of labour is greater than the wage rate, the firm will hire more workers. Eventually, however, as more workers are hired, their productivity will start to fall. For example, the additional workers will take on lower and lower value tasks. Once the marginal productivity has fallen to the point where w=p*MPL, the firm stops hiring.
By the same reasoning, if the wage rate is more than the value of what a worker produces, the firm will fire workers. The only possible equilibrium is one where wages are determined by productivity.
Note that I'm assuming the market is competitive, so no one firm's hiring decisions has any impact on the prevailing wage rate, and each firm is too small to have any impact on the market price of its output.
Apple's policy of no commissions and moderate wages might appear to violate the "workers are paid the marginal value product of labour" rule. After all, according to the New York Times, "Divide revenue by total number of employees and you find that last year, each Apple store employee — that includes non-sales staff like technicians and people stocking shelves — brought in $473,000." If one tenth of the value of Apple store sales can be attributed to their retail employees, that would imply an average annual salary of $47,300, and a typical employee makes closer to $25,000.
"The marginal product of labour" is an abstraction. The idea is simple enough - what an additional worker brings to the production enterprise - but the implementation is not.
For example, think about the simplest possible production technology: one worker + one shovel digging a hole. Without the shovel, the worker produces nothing. Without the worker, the shovel produces nothing. Together, they produce a hole in the ground. What is the "marginal productivity" of the worker? Of the shovel? It's like the sound of one hand clapping - it's impossible to tell what each member of the production process contributes.
[Update] Another way of putting this is that the very idea of a marginal product only makes sense with certain types of production functions, ones for which it is possible to make small adjustments in the quantity of each input used. For example, if I am making a cheese sauce from scratch, I can work out the 'marginal productivity' of cheese, the amount of extra deliciousness added by each additional tablespoon of grated cheese. When input ratios are fixed, however, the marginal product calculation makes less sense. For example, making a white sauce from scratch requires a fixed ratio of flour and milk (2 tbsp flour to each cup of milk); any less it's too runny, any more it's too thick. The marginal productivity of flour is at first very high (without it the sauce couldn't be made) and then abruptly drops to zero. The sudden drop in the productivity of, say, flour means that the marginal product is - at the point where the marginal product function is discontinuous - undefined.
With fixed-input-ratio production technologies, like one shovel/one worker, allocating the profits is like dividing a pie. When two parties are bargaining over who gets a pie, no one will ever accept less than their outside option - the amount that she could get if she walked away. If the worker's outside option is $10 per hour, he will never accept any wage less than $10 per hour; if the outside option is $2, a wage of $7 starts sounding pretty good.
Outside options explain why Apple can pay its workers a fairly low wage. If a typical Apple specialist or genius walked away from their job, their next best alternative might be an even worse retail position.
Could Apple just walk away from its employees? At an individual employee level, it can - there are more people looking to work at Apple stores than positions available. The picture to the right suggests that Apple might be able to walk away from its specialists at a collective level, too.
That is the basic problem with the argument that Apple workers should earn high wages because they sell products with thousands of dollars. Ultimately, it doesn't matter how much you sell, if you can be replaced by a vending machine, you are in a weak position to bargain for a higher salary.