Norm Peterson gets paid (a lot) for a terrible job

Economic Lessons from Cheers

How much would you need to be paid for a terrible job? In one episode of Cheers (see video below), Norm Peterson gets a 300% raise in order to fire people. He absolutely hates the job, but he’s paid well to do it.

This is an example of what economists call a compensating wage differential. That is the concept that jobs that are less desirable or more dangerous will result in higher salaries. It all comes down to economics - supply and demand. If a job is less desirable or more dangerous, fewer people will want to work in that role, which will decrease the supply.

When the supply is lower, the equilibrium price is higher. In this case, the supply is fewer workers and the “price” is the wage in the market (clink link for full description).

Compensating wage differentials can occur for many reasons. Norm gets paid more because he hates his job. Others might not hate their jobs but they are more dangerous. All else equal, most people would rather work a safer job than a more dangerous job, which would cause the pay for more dangerous jobs to be higher. In fact, given men are far more likely to work dangerous occupations (see graphic below), this explains some of the gender wage gap.

(Graphic obtained from Tweet at this link).

While Cheers began it’s run over 40 years ago - it still provides some great lessons of economic concepts.

Watch the video of Norm getting paid for this terrible job with my video explanation here: