The Wage Gap

One of the Democratic Party’s top priorities in 2020 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, but let’s test the thesis before we jump on any bandwagon.

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: We’re not going to close the wage gap, 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 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% incomes grew 4 times faster than bottom 90% incomes. 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.

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