http://www.economist.com/node/21542773
We all know that in America, especially in recent years, there is a large gap between workers and executives, or the rich and the poor. This phenomenon is not particular to America, Europe experiences similar problems. In the last 12 years the ratio from executive to average pay has grown 47 to 120 times!
The author proposes that the 'rich get richer' effect is a result of globalization. Executives now require different skills and different pay than before. Prior to globalization, executives were serving domestic costumers, giving the workers more control. Today, however, companies are inter/multinational.
Economic inequality is a serious problem all around the world and corporations can not be trusted to fix this problem on their own. Companies today are willing to pay extra for a reputable boss when they know the average worker comes and goes.
How do we fix the economic disparity between the worker and executive? The more laws that are put in place, the farther we get from a free market. But at some time, equity needs to be considered.
the statistic from the article "Pay at the top grew by over 300% between 1998 and 2010." is much higher than I expected. This is going to be a hard problem to fix especially since the payment for the top executives just continues to increase, creating and even larger gap between the workers and the executive.
ReplyDeleteI think that there is only so much the government can do, as Max said the more laws that are put in to place sends us further from a free market. So basically it must come down to the CEOs and what they must give up in order to have more equality. Although, this is definitely easier said than done because most CEOs do not want to give up some their nice, large paycheck.
ReplyDeleteThe article reads, "Getting and keeping a good boss matters more to a firm’s owners than how much he or she is paid; and they invest internationally, so they know how much good bosses need to be paid. This looks more like a market rate than a market failure."
ReplyDeleteI think this an interesting point because I believe that companies are now more willing than ever to offer executives unprecedented levels of compensation. The tumultuous global economy and volatile markets put companies at great risk for default. Effective guidance and leadership are necessary to ensure the continued success of major corporations. I think that many companies assume (maybe incorrectly) that the pool of qualified candidates is very limited and they need to offer a competitive level of compensation to capture talent.
I completely agree with you, Ryan. Compensation, especially for executives, has grown at an alarming rate over the past couple of decades. There are many people that are perfectly qualified for high paying jobs, maybe even more so than those currently in certain positions, but they are often overlooked. Also, some people that are more than qualified for executive positions would rather strive for different job opportunities that pay less because they are more satisfying in areas aside from compensation.
ReplyDeleteI think a valid point is that through globalization more companies need managers with the skill sets to be able to perform extraordinary tasks as well as cross-cultural tasks that become increasingly more complicated, and as such the market for these individuals becomes highly competitive.
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