The Wage Gap

If Nancy Pelosi’s post-coronation comments are a useful indicator, then one of the Democrats’ 2019 priorities will be to reduce the pay gap between lower-income workers and America’s CEOs, hedge-fund managers, famous entertainers, and cosmetic surgeons (to name a few). In all fairness, reducing the pay gap sounds like a fine idea, but we on The Other Side are loath to jump on any bandwagon until we test the thesis.

For illustrative purposes, let’s assume that our low-end wage earner is a retail salesperson who makes $20 per hour (circa twice the minimum wage depending on the state), and our high-end wage earner is a large-company CEO who makes $100 million per year.  (See Notes below.)  If our exemplary CEO works 80 hours per week 50 weeks per year, then he or she makes $25,000 per hour.

That’s a pretty big gap, so let’s grow a conscience and fix it. Because we’re politically aware, therefore incrementalists, let’s increase the retail salesperson’s hourly wage by 6% per year, or about two times inflation, and the CEO’s by 1.5% per year, or about half the rate of inflation. (That seems awfully unfair to the CEO and is contrary to recent history, but let’s run the numbers anyway, just to see what happens.)

In the first year, the salesperson’s wage increases by $1.20 per hour. The CEO’s income increases by $375 per hour, so the wage gap increases by $373.80 per hour.

Lest we forget, though, we’re raising the salesperson’s wage four times faster than the CEO’s, so the gap will eventually begin to close. In this instance, it takes 134 years.

Fortunately, there are other ways to close the gap. We could, for instance:

  • Pay everyone the same wage, which sounds a lot like communism before the usual corruption sets in.
  • Freeze CEO wages until retail salespeople catch up, or for about 123 years (using same-case assumptions).
  • Replace inflation with deflation. (Ask your local economist about that idea!)
  • Increase taxes on the one percent, which has been politically impossible in this country since the rich were rebranded the “Donor Class.”
  • Declare war on a well-armed sh*thole country, draft the rich, and send them to the front lines in orange jump suits.

The bottom line: In the absence of draconian measures, we’re not going to close the wage gap. It’s math.

So… Let’s stop raging about the wage gap and focus on what matters, which is raising the incomes of workers on the lower rungs of the ladder. If we can find a workable solution, they’ll be healthier, more productive, and less dependent on Medicaid, SNAP, and other government programs––and a handful of CEOs may feel less guilty about the fact that they still earn 2,000 times more than some of their less fortunate employees.

Notes:  

1) The top 200 hundred wage earners in the US had an average income of slightly less than $97 million in 2017.

2) Also in 2017, top 1% income grew 4 times faster than bottom 90% income. That’s not counting the tax break.

3) We checked the dictionary. Incrementalist is not a word, but it seemed to fit the bill, so to speak.

4) SNAP stands for Supplemental Nutritional Assistance Program, formerly known as food stamps. About 1 in 8 American workers qualify for the program.

One thought on “The Wage Gap

  1. No problem with your hypothesis or analysis. It is too complicated to go into in this forum, but one can lay the cause of inadequate taxes on those who do not pay their fair share as a portion of income. Transfer payments are another cause. Using your example; a person making $6M a year could easily pay $600k which results in a 10% tax with NO deductions. Also, a person at that income level does not require govt assistance in the form of social security income. Taking that thought a step further: eliminate the SS income cap. Voila! we have just solved the two problems that are going to require draconian actions in the very near furture. Obviously, this is highly simplistic, socialistic, and there is not the political will to undertke such measures, but it illustrates that the problems discussed have solutions that can be remedied. It will take courage this country doesn’t have and the willingness of it citizenry to change its view of equitable support to runnning the government without engaging in whose contribution is larger. Every citizen would pay some taxes- no exceptions – for the privlege of being a US citizen. It”s been proven that the govt, through transfer payments, shares its wealth with its citizens. And so it goes…

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