I think Americans workers are willing to tolerate conditions of exorbitant wealth disparity for at least two reasons.
First, because Americans believe someday that they will be wealthy and they do not want to eliminate their chance to join the club[a]. In my opinion, this is the most satisfying explanation. Workers do not want to remove that ladder to the upper class because in doing so, they place a hard cap on their expected outcomes.
Second, American political culture is derivative of a property-rights focused political philosophy. One of the biggest influences on the Bill of Rights and it's explicit protection of property rights was John Locke's Two Treatises of Government. John Locke argues that a defining purpose of government is in the protection of property (life, liberty and property). Americans therefore, view wealth as at least in some part meritocratic and rich, having earned their extra property, are wary of retracting that property. The importance of protecting what's "theirs" is politically, socially and legally baked-in to society.
If Americans' belief in their own prosperity suffer and/or the relative importance of property diminishes in light of other rights (health care, equality, etc.), I think then we might begin to see changes for high-wealth compensation. But, I would argue as long as each of these remain strong, we aren't likely to see any changes.
I think Americans workers are willing to tolerate conditions of exorbitant wealth disparity for at least two reasons.
I think most likely most American workers feel pretty helpless, like pawns in a game they can't exercise control over. They likely do not think of themselves as tolerating wealth disparity. They most likely think of themselves as enduring something they simply can't fix.
Americans realize that any tool that can be used to remove wealth from the rich can be used wealth from themselves as well.
France recently had what, like a hundred days of continual protests over poor economic conditions? But yes, give politicians more power to fight the fat cats. That'll work!
---
EDIT: Check my profile, I founded a healthcare billing company. You know who supported the Affordable Care Act the most? Insurance companies. [1]
This! Every time I hear about a new tax for the rich, somehow the middle class end up actually paying it.
The rich have every tool in their arsenal to limit their tax liability. When you can afford the best accountants, lawyers, and politicians that money can buy, you can ensure that you will never have to pay your fair share. Oh, and even if a new law somehow does make their costs go up, they'll just pass it on to the middle class by raising the prices on whatever they sell to us to make money.
It’s simpler than that - there is no economic system that both rewards and incentivizes productivity that wouldn’t result in stark wealth or income equality.
Consider a simple game of flipping coins would result in similar inequality despite it not being a game of skill at all.
Inequality is inevitable. Waste of time and energy discussing that. Rather we should discuss actual quality of life grievances (and to be fair these may be related to the inequalities).
There's also the weird and uncomfortable truth that substantial wealth accumulated all in one place is what keeps a significant amount of private business, arts, and craftsmen in business.
Who really needs a beautifully-curved hand-carved wood staircase? Nobody, but rich guys want them occasionally, so that's keeping a whole company and a couple of master craftsmen in business.
You could argue that this is just a misallocation of resources and that without said rich guys the same economic productivity would move elsewhere instead. But I'm not convinced that's equivalent, it's "mythical man-month" reasoning. $1 in 100 people's pockets is not the same as $100 in one pocket.
I'm not at all arguing that the money is deserved or that we shouldn't consider wealth redistribution policy. As you said, it comes back down to quality of life. When we talk about wealth inequality, it's important to realize that we're not trying to prevent people from making money and spending it on things other than groceries and gas, we're trying to prevent people from being materially poor, and mess with everything else as little as possible.
I often hear your first point repeated, but have never met a poor person that thought they were going to be a millionaire.
However, I think it is a biased caricature of a real phenomenon.
I think Most Americans don't want the government to put limitations on how successful they can be and put barriers in their way if they start being coming successful.
This is essentially the same idea with different framing
Part of the issue is that regulation tends to hurt small businesses more than big ones. So I think resistance to adding new rules is somewhat justified by the experience that adding new rules makes it primarily harder to run small business. Whether this is a matter of naivety in policymaking or anticompetitive regulatory capture is another issue.
Even the shareholders of some of these firms think the executives are robbing them with the compensation they've set (see ongoing Tesla lawsuits, for example). But, they can't come up with a clear rule for what "appropriate" pay is.
I suspect we'll hit a point where the pay is so excessive that it's worth buying companies purely to cut the pay of management, as it'll be the easiest way to improve profitability.
These stats are so meaningless. American big tech workers make literally tens to hundreds of thousands of times more than poor Africans.
Ok, what are we going to do about it? Of course, someone will respond moving the goal posts about how it’s different.
Turns out when you’re the one making too much money it doesn’t matter or count, which is, funny enough, the same thing these health care CEOs would say.
Unlike many hypocrites I have absolutely no problem making thousands more than the global poor and the global rich making more than me either. It is what it is. I can make hundreds of thousands more while still hoping and contributing to raising the floor in quality of life. Not impose meaningless arbitrary income limits.
People think this line of thinking is to shut down discussion, but there’s no discussion to be had to begin with. Shall we make everyone have the same wage? No? What’s the actual proposal here? None.
>I can make hundreds of thousands more while still hoping and contributing to raising the floor in quality of life.
I used to believe this too. Sadly the statistics suggest this is no longer happening and millennials as a generation are the first to be worse off than their parents, with rising income inequality being a driving factor. Robert reichs class is available for free on YouTube, interesting stats to follow to help entertain other perspectives.
Robert Reich is a far-left hack who claimed that "a libertarian vision of an uncontrolled internet [is] the dream of every dictator, strongman and demagogue".
> Unlike many hypocrites I have absolutely no problem making thousands more than the global poor and the global rich making more than me either. It is what it is.
Good for you. I believe that's a privilege one has to be able to throw hands and say "it really is what it is". That's totally alright if one is aware that it's a privilege. I assume no malice over your comment, but to even discourage discussion on wealth inequality is awful.
Right, it's not alright specifically because they're not only saying "I'm financially comfortable and I don't care if other people aren't", they're saying "you shouldn't care either and we should all stop talking about it, aren't I mature?" Seems antisocial to me.
Wealth inequality is not an issue. Repeat after me: it’s not an issue.
There are, however actual quality of life issues to be resolved and discussed. Trying to take things from people to make things right has never worked, ever. Including the infamous French Revolution.
You’re comparing workers in two vastly different markets to workers in the same market. In the US, wages for one class of employee have exploded as wages for the rest have stagnated.
Irrelevant and ultimately arbitrary distinction. Is it bad for certain people to have too much money or not?
Consider that Americans waste more energy and generate more greenhouse gasses that citizens in other, lower emitting countries pay for - we are all on the same planet.
Ultimately these discussions devolve to people just being bitter others having more than them.
I agree, and to solve this problem I say we nationalize and socialize healthcare to provide it to all citizens free of cost just as they do in many African and other countries. This will remove the need to have any healthcare CEOs entirely.
I thought for a while now that the healthcare industry should have the highest profit margins in a properly functioning economy. Surely saving lives should be rewarded more than serving ads or reality television.
It seems like the common thought is that goods and services that are the most valuable should have the least rewards and incentives for people to produce, when in fact we should incentivize them the most.
For the economically-minded folks out there, there's a difference between profit incentives and total cost. Ideally the economic system would be set up to drive cost of goods down in general.
In your world, the healthcare industry should have the highest profit margins because it saves lives. But in the real world, the healthcare industry has the highest profit margins because it lets people suffer and die. How did we get here?
What is more important than your life! Hey, you're bleeding out right now! Sign this contract where you pay me everything or we won't treat you.
Capitalism only works if you have the option of shopping around, if there is competition. If you're dying, then the first ambulance to reach you get to charge you whatever they like - and they do. And they can take you to an ER where doctors can charge whatever they like - and they do.
So, hey, let's introduce insurance! Now, the purchase decision is separated from the crisis.
Except the goal of the insurance CEO is to maximize profit. No different than any other business. And they do that by not paying for things. Denied. Denied. Denied. And if they can't deny, then they can insist on cost caps.
And of course, the ambulance and ER doctors don't like caps, and so they all leave the "network", and can charge you what they want. And they do!
And the insurance CEOs don't like that and so they say that if you use an out-of-network doctor then they don't cover you, or they cover you even less.
And they pay Trump and Republicans money to pass a law that says, actually they can sell you insurance that doesn't cover anything (if you read the fine print)!
So then maybe you decide that you need a single payer system like the UK, but then the rich people decide that they don't want to pay for the poor people, so they pay the government officials (or they are the government officials) to cut spending and cut spending and now no doctor wants to be a doctor and they can do quite well in a private system or leaving the country.
I think the fundamental problem with your statement is that there is no such thing as a "properly functioning economy". There is only human greed, tribalism and psychopathy.
> Of course, someone will respond moving the goal posts about how it’s different
It's very different though, we're talking about either workers under the same company, or citizens within the same country.
Both of which have social contracts binding the people within those organizations.
If you're working for one of these companies, it's your potential comp going to that CEO. You've also contributed to that income with your work at the company. There's more entitlement and reason to feel like the CEO isn't pulling in the weight of it's comp. That you're not getting the same comp to value ratio. That you could do better or just as good a job as them, etc.
Similarly, as a citizen, you might feel they're not producing value to society proportional to their wealth. That they're not paying their fair share, etc.
If some poor person in Africa had also entered in a similar social contract, they'd have similar rights to complain about your big tech salary relative to theirs. And you might be more concerned about it as well, you might be asking for better social welfare or free healthcare for example, to help them out. Or discuss changes to tax brackets. Etc.
Ah yes this old callous ignorant BS. Get off the internet and go out into the world and talk to your fellow citizens outside your income bracket and stop abstracting things to a point where you feel comfy missing the point.
Your argument is that nothing should be done about the absurd gains of the vertical part of a parieto distribution because differences in the long tail of the horizontal part exist.
Agreed. These articles use a mix of greed, envy, and wrath. It's always, "a good thing happened to someone while a bad thing was happening to someone else!"
How much does a nurse deserve make? Or a home health worker? Or a waiter? Or a teacher? Or a software engineer? Or a business executive?
I’m not prepared to put a dollar amount on what anyone deserves to make, and neither are any of you.
The thing with capitalism is that there isn’t someone going around trying to set prices for things based off some moral philosophy. Prices and wages are based on what people are willing to pay.
Sounds like we have a healthcare CEO shortage then because the market is paying an exorbitant amount for something that doesn’t need to be as scarce.
With that aside, I suspect (and many other commenters here as well) that there’s price fixing involved in executive pay, creating an artificial floor that insulates from the effects of the labor market
CEO compensation is often disconnected from traditional supply and demand dynamics or direct value creation, and that's a problem.
1. They set their own pay
CEOs determine their own pay packages or have influence over the decisions of compensation committees.
2. Their compensation keeps escalating higher and higher over time, beyond reasonable impact to performance
Companies benchmark their CEO's compensation against that of peers in similar roles at other companies. This leads to a "race to the top" effect, where CEOs' pay keeps escalating without direct correlation to company performance.
3. They're rewarded for short term gains
CEO's often have bonuses driven by short term stock performance, so they can game their decisions to maximize their own pay over the companies long term benefit.
4. Who is considered for the role of CEO is artificially limited
Only people with experience managing a slightly smaller company are considered qualified. This makes the pool of candidate small, which allows them to justify a high pay.
5. They're an inner club
Eventually, it's CEO's hiring CEO's and setting each other's pay. It's normal that they all eventually decide to pay each other more and more. As CEOs are on boards and board members are CEOs.
It depends. In private companies it can be the CEO, or the CEO can be the owner who sets it's own comp. But generally yes, it's the board of directors, but rarely without input from the CEO. So it's not uncommon for CEOs to have an influence over the compensation committee about what their comp should be.
One might think of executive pay in the same way startups think about user acquisition cost versus lifetime value. The question isn't just about the numbers per se, but about the underlying value an executive brings to the organization, and whether that value justifies the cost.
History has shown that markets often reward the bold and innovative, but they also have a way of self-correcting when things go astray. The parallel with executive pay is intriguing: how do you quantify the value of leadership, vision, and strategic acumen?
it seems the debate around executive pay reflects deeper societal questions about value creation and value distribution. maybe, possibly, the solution isn't to reduce executive pay outright, but to tie it more closely to demonstrable long-term value creation, not unlike how successful startups operate.
Or how about ceos serve on other ceos boards and have been approving absolutely outrageous packages for 30+ years and now we’re in clown world.
All of that nonsense about value and vision means nothing when ceos helm companies who are protected by a myriad of what should be considered antitrust violations.
What vision and value could a healthcare ceo possibly provide?
Been in the corp world for 20 years and not once have I seen any meaningful change come from a ceo of companies the size of which we’re talking about.
I agree, their value is greatly exaggerated beyond their clique who are also in onto the scheme. They do bring a lot and are a key player to their value extracting system, more than the actual worker who gets the job done. When things go south they have golden parachutes. Whatever they risk is taken care of.
> how do you quantify the value of leadership, vision, and strategic acumen?
A bunch of rich people on the board vote on compensation. It doesn't have anything to do with quantifying the "value" of the CEO's supposed qualities. They do it based on their own opinions and biases, what they get out of the deal as shareholders and board members, and maybe a commissioned study based on pay of CEOs at similar companies.
If we did have a philosophy that allowed us to perfectly quantify that value, it wouldn't change how the process actually works for setting their pay.
Yeah, no free lunch / easy solutions here. post-ex evaluation often misses the ongoing impact of decisions made during a leader's tenure. also there is difficulty in isolating the effects of a single leader from the myriad of other factors that could influence a company's success post-exit. ex. Market conditions, subsequent leadership, and unforeseen global events, to name a few
Readit News
First, because Americans believe someday that they will be wealthy and they do not want to eliminate their chance to join the club[a]. In my opinion, this is the most satisfying explanation. Workers do not want to remove that ladder to the upper class because in doing so, they place a hard cap on their expected outcomes.
Second, American political culture is derivative of a property-rights focused political philosophy. One of the biggest influences on the Bill of Rights and it's explicit protection of property rights was John Locke's Two Treatises of Government. John Locke argues that a defining purpose of government is in the protection of property (life, liberty and property). Americans therefore, view wealth as at least in some part meritocratic and rich, having earned their extra property, are wary of retracting that property. The importance of protecting what's "theirs" is politically, socially and legally baked-in to society.
If Americans' belief in their own prosperity suffer and/or the relative importance of property diminishes in light of other rights (health care, equality, etc.), I think then we might begin to see changes for high-wealth compensation. But, I would argue as long as each of these remain strong, we aren't likely to see any changes.
a. https://www.magnifymoney.com/news/wealthy-survey/, https://www.cnbc.com/2022/08/31/44percent-of-americans-think...
I think most likely most American workers feel pretty helpless, like pawns in a game they can't exercise control over. They likely do not think of themselves as tolerating wealth disparity. They most likely think of themselves as enduring something they simply can't fix.
1. Making health care more affordable
2. Dealing with terrorism
3. Reducing gun violence
4. Addressing climate change
5. Reducing income inequality
6. Reducing illegal immigration
And #6 is quite telling in the context of income inequality.
https://www.pewresearch.org/social-trends/2020/01/09/most-am...
Americans realize that any tool that can be used to remove wealth from the rich can be used wealth from themselves as well.
France recently had what, like a hundred days of continual protests over poor economic conditions? But yes, give politicians more power to fight the fat cats. That'll work!
---
EDIT: Check my profile, I founded a healthcare billing company. You know who supported the Affordable Care Act the most? Insurance companies. [1]
[1] https://publicintegrity.org/health/insurers-backed-obamacare...
The rich have every tool in their arsenal to limit their tax liability. When you can afford the best accountants, lawyers, and politicians that money can buy, you can ensure that you will never have to pay your fair share. Oh, and even if a new law somehow does make their costs go up, they'll just pass it on to the middle class by raising the prices on whatever they sell to us to make money.
Unintended consequences are real.
Consider a simple game of flipping coins would result in similar inequality despite it not being a game of skill at all.
https://www.scientificamerican.com/article/is-inequality-ine...
Inequality is inevitable. Waste of time and energy discussing that. Rather we should discuss actual quality of life grievances (and to be fair these may be related to the inequalities).
Who really needs a beautifully-curved hand-carved wood staircase? Nobody, but rich guys want them occasionally, so that's keeping a whole company and a couple of master craftsmen in business.
You could argue that this is just a misallocation of resources and that without said rich guys the same economic productivity would move elsewhere instead. But I'm not convinced that's equivalent, it's "mythical man-month" reasoning. $1 in 100 people's pockets is not the same as $100 in one pocket.
I'm not at all arguing that the money is deserved or that we shouldn't consider wealth redistribution policy. As you said, it comes back down to quality of life. When we talk about wealth inequality, it's important to realize that we're not trying to prevent people from making money and spending it on things other than groceries and gas, we're trying to prevent people from being materially poor, and mess with everything else as little as possible.
However, I think it is a biased caricature of a real phenomenon.
I think Most Americans don't want the government to put limitations on how successful they can be and put barriers in their way if they start being coming successful.
This is essentially the same idea with different framing
Even the shareholders of some of these firms think the executives are robbing them with the compensation they've set (see ongoing Tesla lawsuits, for example). But, they can't come up with a clear rule for what "appropriate" pay is.
I suspect we'll hit a point where the pay is so excessive that it's worth buying companies purely to cut the pay of management, as it'll be the easiest way to improve profitability.
Ok, what are we going to do about it? Of course, someone will respond moving the goal posts about how it’s different.
Turns out when you’re the one making too much money it doesn’t matter or count, which is, funny enough, the same thing these health care CEOs would say.
Unlike many hypocrites I have absolutely no problem making thousands more than the global poor and the global rich making more than me either. It is what it is. I can make hundreds of thousands more while still hoping and contributing to raising the floor in quality of life. Not impose meaningless arbitrary income limits.
People think this line of thinking is to shut down discussion, but there’s no discussion to be had to begin with. Shall we make everyone have the same wage? No? What’s the actual proposal here? None.
I used to believe this too. Sadly the statistics suggest this is no longer happening and millennials as a generation are the first to be worse off than their parents, with rising income inequality being a driving factor. Robert reichs class is available for free on YouTube, interesting stats to follow to help entertain other perspectives.
[0] http://web.archive.org/web/20220412104542/https://www.thegua...
Why? What are we doing differently now than we used to?
Good for you. I believe that's a privilege one has to be able to throw hands and say "it really is what it is". That's totally alright if one is aware that it's a privilege. I assume no malice over your comment, but to even discourage discussion on wealth inequality is awful.
There are, however actual quality of life issues to be resolved and discussed. Trying to take things from people to make things right has never worked, ever. Including the infamous French Revolution.
You're mistaking region for (labor) market.
The market for different kinds of jobs is different. Otherwise everyone would be paid the same.
Consider that Americans waste more energy and generate more greenhouse gasses that citizens in other, lower emitting countries pay for - we are all on the same planet.
Ultimately these discussions devolve to people just being bitter others having more than them.
So you're saying we don't need pharmaceutical companies on earth?
It seems like the common thought is that goods and services that are the most valuable should have the least rewards and incentives for people to produce, when in fact we should incentivize them the most.
For the economically-minded folks out there, there's a difference between profit incentives and total cost. Ideally the economic system would be set up to drive cost of goods down in general.
What is more important than your life! Hey, you're bleeding out right now! Sign this contract where you pay me everything or we won't treat you.
Capitalism only works if you have the option of shopping around, if there is competition. If you're dying, then the first ambulance to reach you get to charge you whatever they like - and they do. And they can take you to an ER where doctors can charge whatever they like - and they do.
So, hey, let's introduce insurance! Now, the purchase decision is separated from the crisis.
Except the goal of the insurance CEO is to maximize profit. No different than any other business. And they do that by not paying for things. Denied. Denied. Denied. And if they can't deny, then they can insist on cost caps.
And of course, the ambulance and ER doctors don't like caps, and so they all leave the "network", and can charge you what they want. And they do!
And the insurance CEOs don't like that and so they say that if you use an out-of-network doctor then they don't cover you, or they cover you even less.
And they pay Trump and Republicans money to pass a law that says, actually they can sell you insurance that doesn't cover anything (if you read the fine print)!
So then maybe you decide that you need a single payer system like the UK, but then the rich people decide that they don't want to pay for the poor people, so they pay the government officials (or they are the government officials) to cut spending and cut spending and now no doctor wants to be a doctor and they can do quite well in a private system or leaving the country.
I think the fundamental problem with your statement is that there is no such thing as a "properly functioning economy". There is only human greed, tribalism and psychopathy.
Have a great weekend!
It's very different though, we're talking about either workers under the same company, or citizens within the same country.
Both of which have social contracts binding the people within those organizations.
If you're working for one of these companies, it's your potential comp going to that CEO. You've also contributed to that income with your work at the company. There's more entitlement and reason to feel like the CEO isn't pulling in the weight of it's comp. That you're not getting the same comp to value ratio. That you could do better or just as good a job as them, etc.
Similarly, as a citizen, you might feel they're not producing value to society proportional to their wealth. That they're not paying their fair share, etc.
If some poor person in Africa had also entered in a similar social contract, they'd have similar rights to complain about your big tech salary relative to theirs. And you might be more concerned about it as well, you might be asking for better social welfare or free healthcare for example, to help them out. Or discuss changes to tax brackets. Etc.
I mean not really if you’re a labor market participant. Maybe there’s an argument to be made if you’re talking about profit sharing.
I’m not prepared to put a dollar amount on what anyone deserves to make, and neither are any of you.
The thing with capitalism is that there isn’t someone going around trying to set prices for things based off some moral philosophy. Prices and wages are based on what people are willing to pay.
With that aside, I suspect (and many other commenters here as well) that there’s price fixing involved in executive pay, creating an artificial floor that insulates from the effects of the labor market
1. They set their own pay
CEOs determine their own pay packages or have influence over the decisions of compensation committees.
2. Their compensation keeps escalating higher and higher over time, beyond reasonable impact to performance
Companies benchmark their CEO's compensation against that of peers in similar roles at other companies. This leads to a "race to the top" effect, where CEOs' pay keeps escalating without direct correlation to company performance.
3. They're rewarded for short term gains
CEO's often have bonuses driven by short term stock performance, so they can game their decisions to maximize their own pay over the companies long term benefit.
4. Who is considered for the role of CEO is artificially limited
Only people with experience managing a slightly smaller company are considered qualified. This makes the pool of candidate small, which allows them to justify a high pay.
5. They're an inner club
Eventually, it's CEO's hiring CEO's and setting each other's pay. It's normal that they all eventually decide to pay each other more and more. As CEOs are on boards and board members are CEOs.
There are millions of CEOs in the US, more in smaller companies than larger companies, and shockingly small companies pay CEOs much less.
So why not do that comparison? Oh yeah, because the numbers aren't clickbait worthy.
History has shown that markets often reward the bold and innovative, but they also have a way of self-correcting when things go astray. The parallel with executive pay is intriguing: how do you quantify the value of leadership, vision, and strategic acumen?
it seems the debate around executive pay reflects deeper societal questions about value creation and value distribution. maybe, possibly, the solution isn't to reduce executive pay outright, but to tie it more closely to demonstrable long-term value creation, not unlike how successful startups operate.
All of that nonsense about value and vision means nothing when ceos helm companies who are protected by a myriad of what should be considered antitrust violations.
What vision and value could a healthcare ceo possibly provide?
Been in the corp world for 20 years and not once have I seen any meaningful change come from a ceo of companies the size of which we’re talking about.
A bunch of rich people on the board vote on compensation. It doesn't have anything to do with quantifying the "value" of the CEO's supposed qualities. They do it based on their own opinions and biases, what they get out of the deal as shareholders and board members, and maybe a commissioned study based on pay of CEOs at similar companies.
If we did have a philosophy that allowed us to perfectly quantify that value, it wouldn't change how the process actually works for setting their pay.
Like what if the average CEO looks like they have a history of making above average decisions but is really just lucky?
Post-ex?
Just a very small percentage of wages ...
These comparisons are so disingenuous when they implicitly equate a stock grant to cash.