Turn the economic tides?

Question

Here is the problem, in today's news we have 2 reports.:

1. CEO salaries have risen to astronomical levels such as 100 times greater than yours or mine.

2. The average American median income has risen 0.7 % since 2001 during the last economic upswing.

So those at the very top get more than they need and we at the middle and bottom can just about or not even get by.

And yes the poverty level has shrunk and some of those who were in poverty now make more than $10,800 elevating them to what? the upper poverty stricken? In America how do you live on 10K?

So here is the question how do we turn things around?

Answer 1

If you think CEO's make a lot of money, take a look at the compensation for managers of hedge funds and the like.

The solution for individuals isn't pretty, and most won't do it, but it's the only answer.

Part one is stop working for other people. If you work for someone else, you're selling them your time at wholesale, and they make money by selling it to someone else at retail. If you work for yourself, you get full retail value for your time. That may be hard to do with some skillsets, but there are few skills other than being a government employee that absolutely cannot do it.

Part two is give local businesses a chance. Before you go buy something at a giant chain store, give the small local business a chance. They probably won't always have the best prices, but they will often enough to make it worth the effort, plus the service will be a lot better.

These two things promote small business ownership, and that's how we as a society correct the imbalance in CEO salary.

Answer 2

This answer needs to be split into at least two parts:

1) How do we [i.e. non-CEOs] turn things around?
2) What do CEO salaries (whether high or low) have to do with "us"?

I'm only going to address the first question, though, because that seems to be what you're most interested in.

What you're asking is how to diminish the "income gap", which is the difference between people who earn a lot of money and people who earn very little. This issue has been debated politically and economically for at least 200 years.

There are two ways to look at this: you can try to lower the wealthy's income or raise the poor's income. Or both.

Lowering the wealthy's income is often done through progressive taxation, which is when you pay more taxes to the state, the more money you make, and the state then theoretically redistributes this money to the less-well off.

Or you can provide a "floor" for the poor, in which they will be guaranteed a minimum wage and certain benefits to try to help them from falling through the "safety net".

In the United States, both of these measures exist. So, the short answer to your question would be: tweak these measures.

Answer 3

I don't think there's a problem with CEO salaries. The salaries of CEO's and athletes and many other "overpaid" individual in American society is determined by the market, as they should be. In fact, the only wages that aren't determined by the market are the people on minimum wage, who businesses value the employee's contribution less than what they are paying for, yet are forced by law to pay the employees more than the economically optimal amount.

These people are paid so much because people demand their services. Boards of directors value the experience, drive, work ethic and skills that their CEOs bring to the table, and the board must pay a lot to keep the CEOs there (otherwise, they will go work for another company who pays better!). The same with athletes. Sports is a business. People want to see these athletes play, and they will pay money... really good money... to watch them. Thus the athletes have a lot of money making potential, and are rewarded with gigantic contracts as a result. It's basic economics, if the market for you as a person has a high demand and a fixed supply (there is only one you, after all), then the price will be very high to get you.

My response to your poverty question, and forgive me if I sound like a jerk, is that those people just don't market themselves well enough to make more money. It's as simple as that. The demand for the services that they provide must be very low, or the supply of similarly-qualified people must be very high, so the price for them is low. Economics says you might want to look into other markets (expanding yourself through education or other ways to change how you market yourself).

Finally, I think $10k is enough to live on. You can't live a luxurious lifestyle on $10k, but you can get by, easy. I lived in LA, in one of the most expensive areas of an already expensive city, and my rent was $650 a month. Granted, I was living with 3 other people, and we were splitting rent, but I only spent $7.8k a year on rent, leaving $2.2k a year for food if I made 10k. Seems like enough to me. You want luxuries like TV/Cable/Internet/Phones/Car? Well you're going to have to do something to improve the price people are willing to pay for you.