This is one of the reasons I believe that minimum wage is not the solution to income disparities. However, the overall tone from this article is pessimistic. It give a feeling to the reader that nothing you do can solve inequality. It gives praise to CEOs and supports the power of a board of directors. I do not trust either of these two groups to make the correct decisions. They are only looking for levels of profit, which makes sense. I think it will be interesting to see how the mid-term elections turn out this year. Income inequality is one of the hottest discussion points, so we are almost certain to see a wide variety of policies.
- Do you trust the CEOs and boards of directors to limit CEO compensation?
- Will the 2014 mid-term elections give more hope to solving income disparities?
- Should the focus be on income disparities for wealth inequalities?
- If you could pass one economic policy this fall to reduce income inequalities, what would it be? What are the positives and negatives from this policy?
http://online.wsj.com/articles/mark-perry-and-michael-saltsman-about-that-ceo-employee-pay-gap-1413150999?KEYWORDS=income+inequality
First, the average CEO's compensation figure that Perry is citing is irrelevant, because it's not the average CEO of small business making a hard earned six figure salary that is contributing to income inequality. It's the very small percentage of CEOs who run large corporations and pay themselves seven to eight figure salaries, which is perpetuating income inequality.
ReplyDeleteSecond, the author of this article acts is if a CEO was to forgo a percentage of their compensation that the only thing they could do is redistribute it to all of the employees equally. There are a vast amount of ways in which a company can employ excess cash other than redistributing it to all employees equally, which will benefit both the firm and the employees more (i.e., only full-time employees, capital investments, R & D, shareholder dividends, etc.).
The 5 cent increase as a result of the 100% cut is interesting, especially because so many economists (and even I) see some benefits in reducing income inequality by a slight increase in minimum wage. It is one of the lowest pays among the developed world. Anyway, Alex is correct in saying that it is the large corp CEO's who are of concern here, consequently deeming Perry's notion as less useful in his argument. I do think that the 2014 re-election gives hope to solving income disparities. In terms of something I wish could happen, I wish there could be greater control or regulation on the large corp CEO's salaries, hopefully redistributing some of that money to the middle class.
ReplyDeleteI do not trust the Board of CEO's to handle pay increases appropriately because they have shown in the past that they haven't. Many times corporations have been criticized for losing money and yet still raising CEO pay. However that doesn't mean that I think the government would or should be in charge of it. In order to maintain our capitalist market I think it needs to be left in the hands of the business to make the decision and allow stockholders and investors to make their decision based on the actions of the company.
ReplyDeleteI am greatly surprised by the fact that the average CEO only makes around 5 times the average worker and would like to see more data on this statistics. For example what portion of these corporations are publicly traded or have over 100 employees? It does not require a large investment to turn a business into a corporation so I think that using a statistic of all corporations can be just as dangerous and misleading as using one with just the top 350.
If I were a CEO, there is no way I would limit my own pay. Why would I do that to myself? I personally don't think the midterm elections will solve anything for income disparity. Even if there is a change of power in congress, I still don't think anything will get done. If I could get some policy passed, I personally would decrease entitlement spending and use the extra money to fund infrastructure and education. This would give more lower class individuals the chance to get an education and move up in the world. I think thats the best solution to deal with income inequality.
ReplyDeleteI think this article: The Economist Who Won The Nobel Prize Figured Out Why CEOs Get Such Gigantic Bonuses offers one of the best explanation to CEO's compensation. The political issue and negotiable contracts have helped CEO bring home more and more money. I think the best thing to fix income disparities for wealth inequalities is to invest on education. It is the best way to give the poor a chance to have a better life.
ReplyDeletehttp://www.businessinsider.com/the-economics-nobel-prize-winner-helps-explain-huge-ceo-bonuses-2014-10