A question for economists and the like: the causes and effects of the pay gap? Ways to combat it?

[jpgray]

Used to be a CEO made about 26 times what the average worker made. It jumped to 80 some times as much in the 80s, and now I believe it is 200+ times. What causes this increasing gap? What could mitigate it? Is it simply the structure of the board system? Would changes in shareholder power make a difference? Why is CEO work placed at an exponentially higher value these days as compared to previously? This is simply an issue I have neither the knowledge nor the experience to understand properly.

[sandnsea]

1. Unions.

Who propagated a respect for workers that never previously existed.

Perhaps WWII did that too, with so many men from all walks of life serving together. Perhaps that generation appreciated the concept of "team" like none before or since.

Regardless, it's the loss of respect for the worker that has caused wage disparity.

[jpgray]

2. Too simple. Unionizing is ineffective because scabs are found globally for larger corporations

To my mind, the only way in which to really harm corporations and hold them to account on the worker level is by using our considerable market clout as consumers. This is nearly impossible to organize, however. This is one of those thorny problems with many interdependent causes, methinks.

[HamdenRice]

3. Simply put: bargaining power

As a company's productivity and revenue increase, they are available to several different stakeholders: investors (stockholders), empoyees, management and suppliers, for example.

Who gets that flow of money depends on the bargaining power of each group. Stockholders, for example, used to have very little power other than to sell their shares as individuals. But since the 80s, large stockholders, like institutional investors, and equity firms, and corporate raiders, have been able to scare management into giving a bigger share to investors.

In the past, workers were organized and could threaten strikes (which were very bad for profits and therefore scary to management) unless a big proportion of the revenue was devoted to employee wages. Even if a company was non-union, the wages were set by unionized companies, and the threat to non-union companies was that they would not be able to recruit or retain a workforce.

Union membership has declined and workers have been very vulnerable since the 1980s. They have basically no bargaining power, and as a result almost no productivity or revenue gains since the 1980s have gone to increasing wages beyond inflation.

By contrast, management have basically hogged all the productivity gains for management compensation.

[jpgray]

5. What is a worker-level response that can foment a redistrubition of those gains?

Forget feasibility for a moment--assuming it could be done, what would be effective?

[HamdenRice]

6. World wide, I can think of only three things that have worked

The most important has been unions, by far.

Second would be not within the corporation but outside it in the political sphere -- namely the creation of a strong Labor Party. The African National Congress, for example, has a formal alliance with the Congress of South African Trade Unions, and has improved wages and conditions through the political process. But Labor Parties have traditionally been based on unions, so they are kind of a prerequisite.

The third is that during extremely low unemployment, wages have risen even without unions as companies try to out bid each other for scarce workers.

But basically, it's unions.

[jpgray]

7. Doesn't rampant globalization remit the effect of unions for the largest corporations?

There's literally a world-wide pool of scabs for unskilled manufacturing work, no? Does the threat then have to come from the only other source of working class power, our value as a rich market for goods? Or is that impossible to organize?

[HamdenRice]

8. Not as much as you would think

During the globalization of the 90s, Americans were exporting a lot of industrial basics like steel, even though wages were much cheaper elsewhere.

American workers are extremely productive by world standards, and given the right circumstances, easily compete with cheap labor. Moreover, some plants simply have to be here. It's also very expensive to pick up a factory that's already here and move it to Mexico. Finally, if we had a sane trade policy the huge increase in buying power of, for example, the Chinese working class, would in fact, lead to more exports to China from us.

Globalization does not have to result in the catastrophic economic decline we are facing. The way we are experiencing it is a result of massive incompetence, cronyism, and diplomatic idiocy by the Bush administration.

[jpgray]

11. What are the obstacles to unionization that prevent this from occurring?

Is it a matter of public apathy?

[HamdenRice]

12. A number of things, but especially the National Labor Relations Act

The NLRA was set up to encourage unionization. Companies absolutely had to allow workers to carry out union drives and elections, and couldn't interfere with union organizing. The National Labor Relations Board (set up under the NLRA) intervened routinely and heavy handedly on the side of labor. If a company "retaliated" against a worker for trying to organize, or voting for, a union, the company was in serious trouble facing fines and other penalties. The NLRB also could force companies to negotiate with unions and even "arbitrate" labor disputes, forcing companies to grant wage increases.

In other words, it was national policy to use the federal government to increase unionization.

Reagan came in and one of the first things he did was force a showdown with a federal union -- PADCO, the air traffic controllers union. When they went on strike, he fired the entire federal air traffic control work force. It was a signal to industry that it was open season on unions.

Since then, the federal government does nothing to help organize, and in fact thwarts union efforts. Today, companies harass, fire, and intimidate organizers. Employees are afraid to start unions.

Also there has been a horrible ideological onslaught that has convinced millions of workers that unions are somehow bad for them, and take their dues for nothing, or so union leaders can live lavishly or for mafia corruption, none of which is true. Workers also believe, somehow, that unions create rigid work rules. Also, not true.

In France, unions shut down industry whenever they get pissed off at industry or even the government. That's why they have such a great set of benefits.

Nothing like that can happen here anymore.

[jpgray]

18. Thanks for the insight. What are your thoughts on Taft-Hartley?

[Deja Q]

4. Especially when they get paid big bucks to screw up the company.

Golden parachutes and all...

The claim was they deserved more because their actions could kill the company, which in turn would kill them worst of all.

Nice loophole.

What we ought to be doing is to find ways to become CEOs ourselves.

[hfojvt]

9. progressive tax rates

That's my theory, and look at when it happened - after Reagan.

Imagine if you are a CEO making $4 million a year and the top tax rate is 70%. Suppose some competitor offers you $8 million. Do you take it? It's not really that tempting. With a 70% tax rate $2.8 million of the extra salary will just goto Uncle Sam, and another .28 million or so will goto state income taxes (and in KC .04 million would goto the city income tax). Adding $4 million to your salary only adds .92 million to your pocket, and if you are an anti-government rich bastid, it gives 3.08 million to your worst fu$%ing enemy. There is less incentive to take it, and less incentive to push for more money.

With a top rate of 32% though, and extra $4 million is more tempting. Now you get to keep 2.4 million instead of only .92, and your worst enemy only gets 1.6 million of 'your' 'hard earned' money. Thus, there is more incentive to seek or accept more money. Your current employer needs to jack up your salary just to keep you, and all the jacking up creates a trend and an expectation. Outrageous salaries become the crustimonary proseedcake (as Pooh garbled customary procedure)

[jpgray]

10. Keeping up with the Dow Joneses has always been about petty one upmanship, though

Even if the actual "gain" is comparatively small. Does this really have the effect you believe it does? I hate to ask for data as I believe it would be hard to quantify, but what convinces you this is the case?

[hfojvt]

13. I am using post hoc ergo propter hoc

like I usually do, but I think there is a certain logic to it, and I find the timing to be suspect. Granted, salaries are a way of keeping score, but actual money is an incentive too. Anyway, lets put the top rate back up to 70% for incomes over $500,000 and see what happens.

[JVS]

14. Collectivization

[Phoebe Loosinhouse]

15. The "Greed is Good" ethos of the Reagan 80's

which made amorality and immorality part of the corporate culture.

The upper tier of CEO's and their enabling BOD's threw off the shackles of fiduciary responsibility and decided that corporations exist solely for the hoggish enrichment of the upper tier who cannibalize their own companies with excessive pay, perks, options, golden parachutes, etc., scattering a few crumbs (maybe) in the form of dividends to their shareholders, while selling off assets, closing factories and outsourcing to third world labor so that they could have yet more dollars for themselves, because you can never have too much, can you? Meanwhile they bitch and moan about every cent towards living wages and healthcare for the actual (gasp!) workers.

[AndyTiedye]

16. Don't They Still Get Tax Incentives For Outsourcing?

Kerry brought that up in 2004 campaign, but the MSM didn't want to talk about it because they were too busy Swift Boating him.

It seems that driving down wages has been official government policy. Why else would there be tax incentives for sending American jobs overseas?

[Mike03]

17. A possible analogy

If corporations were movies, then the CEOs, Presidents, and top tier managers/Board of Directors would be like the marquee stars who make the lion's share of the money aggregated for a Hollywood big budget film.

Why? Probably this has to do with how much money the company makes, in combination with its share price and the satisfaction of the investors.

There is no question; the discrepancy in salaries, including ludicrous bonuses, is beyond the pale. Maybe these incongruities will readjust as consumer spending drops and corporate earnings begin to spiral as investors (including foreign investors) exit the markets.

So much of this profit is the result of dangerous derivatives and pyramid scheme type investments and sales of debt that it's going to unwind, and that unravelling is going to be exceedingly painful.

[rucky]

19. Shareholder revolt. n/t