Income Inequality Levels Rising

Thesis: Pay inequality is at exorbitant levels and something must be done to stop this rising inequality.

The income inequality in America has gotten a lot of attention and press for a few years now, so one would think that all of this negative publicity surrounding it would cause this inequality to go away. However a recently released Harvard Business School study proved that “Americans might think they know how bad inequality is, but it turns out they actually have no idea. [This study] found that Americans believe CEO’s make roughly thirty times what the average worker makes in the United States, when in actuality they are making more than 350 times the average worker.” This disparity in incomes is at historic highs, and truly sad how uninformed Americans truly are at just how high this income inequality levels have reached.

The Average annual compensation for CEO’s is by far the highest in the United States.  Supporters of this pay gap may justify this by saying that they need these levels of compensation to remain the number one innovator and country and to attract and retain the most talented and successful CEO’s and businesses. But if this argument were to hold, then the bosses of Wall Street, long considered an area where some of the most successful and smartest people go, should have some of the highest disparities between the top bosses and the average low level employee. However as the Wall Street Journal reported, “The gap between what bank CEOs and their staffs take home in pay has narrowed significantly since the financial crisis, driven mostly by a drop in compensation for the leaders of the five biggest Wall Street firms, according to a Wall Street Journal review of bank regulatory filings.” This is a good sign as the average pay for worker at the top Wall Street Banks rose to new highs, the pay of the CEO’s remained well below their 2006 pre-recession highs.

As explained later in the article, “Wall Street CEO pay “just doesn’t have the leverage that it used to because in many cases the businesses themselves don’t have the leverage,” said Todd Sirras, a managing director at Semler Brossy Consulting Group LLC.” Another possible reason for the lower ratios of CEO to average worker pay for Wall Street is that everyone on Wall Street “even middle-tier finance workers are generally well paid.” While in comparison an analysis from last year, “estimated that it takes the typical worker at both McDonald’s and Starbucks more than six months to earn what each company’s CEO makes in a single hour.”

The income inequality is still high all over America, and must start to dissipate in order to not enrage all American workers. This can be done in many ways, raising the minimum wage paid to low level employees, or lowering the pay of top CEO’s. Either way, something must be done about the widening gap between America’s ellite and the average worker.

One thought on “Income Inequality Levels Rising

  1. David Farnum

    I think the use of financial sector CEO pay might not be a relative counterpoint to justify not needing to have high compensation for CEOs. As a result of the financial crisis, there has been increased scrutiny on the pay and bonuses on Wall Street as well as legislation designed around constraining their pay, which may skew the data of CEO vs average employee pay.

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