The Widening Gap Between Bosses and Workers

Illustration for article titled The Widening Gap Between Bosses and Workers

Forty years ago, the CEO of a dairy company earned $1 million a year, had a nice house, an office above the dairy and a pretty good lifestyle. Today the CEO of the same company today makes $10 million, has a 64-acre spread in Colorado, a nine-story corporate headquarters and a company jet to take him around. The main argument for this tenfold increase in salary is that the world is a much more complicated place, requiring a rare breed of leader whose wages are set by the market.

For all the well-known reasons — dying domestic manufacturing, jobs exported overseas and so on — the real wages of American workers over the last four decades have actually shrunk a bit.

For years, statistics have depicted growing income disparity in the United States, and it has reached levels not seen since the Great Depression. In 2008, the last year for which data are available, for example, the top 0.1 percent of earners took in more than 10 percent of the personal income in the United States, including capital gains, and the top 1 percent took in more than 20 percent. But economists had little idea who these people were. How many were Wall street financiers? Sports stars? Entrepreneurs? Economists could only speculate, and debates over what is fair stalled.


Now a mounting body of economic research indicates that the rise in pay for company executives is a critical feature in the widening income gap.

The largest single chunk of the highest-income earners, it turns out, are executives and other managers in firms, according to a landmark analysis of tax returns by economists Jon Bakija, Adam Cole and Bradley T. Heim. These are not just executives from Wall Street, either, but from companies in even relatively mundane fields such as the milk business.

The article by By Peter Whoriskey in the Washington Post is a good effort at putting the wage gap on the national agenda. Lots of luck. Can you hear the cries of "class warfare" yet? That financial libel is still enough to scare moderate Democrats and Republicans away from an issue that deserves more serious scrutiny. That leaves an echo chamber of market worshippers chattering about economic efficiencies, even as we struggle to understand what the U.S. economy will look like in the coming years.

Read the rest of the story in the Washington Post.

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