Why Wage Inequality isn't a Problem

Introduction to Why Wage Inequality isn’t a Problem:

Many people on both the left and right are concerned about wage inequality. Some people make so much, and others make so little. While that might appear like a problem at first glance, it really isn’t.

In this article on why wage inequality isn’t a problem in America, I would like to show you that in reality, wage inequality is just our capitalist system at work.

Wage Inequality isn’t a Problem Because It is a Byproduct of Capitalism:

Far from being an adverse side effect of capitalism, wage inequality is a positive byproduct of it. Our current socialist, Democratic candidates would have you believe that when one individual makes more than someone else, that is the effect of an evil, Republican cabal suppressing wages.

As a result, they push idiotic policies such as the $15 minimum wage. The $15 an hour minimum wage is a horrible idea, as I discussed in my “The Minimum Wage Debate” post. The socialist politicians think that wage inequality is a huge problem that can only be fixed with government action.

But, that belief is incorrect. It is far from the truth. Instead, most businesses have good wages for successful employees. Amazon works its workers hard, but pays them at least $15 an hour. It also has wonderful benefits for its worker, as a recent RealClearMarkets article (click here: Amazon worker pay) describes.

That increased pay is due to increased work. Because Bezos has been incredibly successful, he can afford to pay his workers more.

And that brings me to my final point: entrepreneurial spirit, risk-taking, and starting your own company are generally the way to get rich in America. Not falling into all of those categories, much less any of them, is a great way to not be rich.

In fact, working at an entry-level job for years is probably the best way to ensure you will make very low wages. And you should, those jobs are meant for entry-level teenagers, not people who have to support a family. On the other hand, starting a business and taking all of the risks associated with that is the way to get rich (hence why wage inequality isn’t a problem). And people like Jeff Bezos have. So is his pay, once stock is taken into account, far higher than the pay of his entry-level workers? Sure, but that’s because he’s the one taking all the risk. Not them.

Is CEO Pay Unfair?

Yes, in some cases wage inequality seems unfair. CEOs make millions while the average worker struggles. But, I firmly believe that good CEOs should make as much as they do. While they may not be taking the same risk as their entrepreneurial peers, their level of responsibility is very similar. While some say CEOs don’t work that hard, just imagine the level of monetary responsibility they have. One or two bad decisions could sink the company, and they make a good number of those decisions each year. CEOs who make the right decisions deserve to be well-compensated for their work, which is one of the main reasons why wage inequality isn’t a problem.

As soon as I bring that up, people often ask, “But shouldn’t their workers be paid more too?” In some cases maybe. Good employees should be rewarded. But at the end of the day, the leaders of an organization are the ones making big decisions. Their pay is commensurate with their level of responsibility. When workers make decisions that have the same potential impact the sure, they should be paid more. But when they are employees merely doing a not-too-difficult job halfheartedly, why should they be paid more?

Finally, people ask “Well what about the high pay of bad CEOs, isn’t that unjust?” Unjust? No. A bad decision by the company? Yes, absolutely. But that is the realm of shareholders and the board. Not the government. If a bad or mediocre CEO is being paid too much, he should have his wages cut or be fired. Just as other bad employees should be fired. But that is not the responsibility of the government. Instead, it is the responsibility of company shareholders to speak out against the CEO being paid too much for shoddy work. Wage inequality isn’t a problem. It doesn’t matter that CEO’s make more. All that matters is if the investment pays off.

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CEOs get paid a lot, especially when they run big companies. But, I think that as long as they perform well, they deserve that pay. Their influence on the monetary fortunes of a company is immense; good leadership can bring about huge levels of success for a company, far more than what it is paying the CEO. In other words, the investment pays off.

Conclusion:

The debate over wage inequality is in my mind much the same as the debate over the minimum wage that I wrote about in “The Minimum Wage Debate.” It shows a liberal disconnect between risk and reward. They think everything should be rewarded the same, basically on an hourly basis. Instead of looking at risk and rewarding those who take on risk and profit off of it, they want everyone to just be equal. That would destroy the economy; wage inequality isn’t a problem, but an economy strangled by regulation and high minimum wages is.

On the other hand, traditional conservatives have supported wage inequality because it is what allows our economy to grow. If there wasn’t wage inequality, who would take on risk? No one. That is one of the many reasons why socialism always fails (as I discussed in my “Why Socialism Always Fails” post); no one want to take risk an invest if there isn’t any incentive to do so. Stagnation replaces growth. Wage inequality is the natural byproduct of capitalism; it is what rewards risk, responsibility, and entrepreneurial spirit, which is why wage inequality isn’t a problem.