It’s funny how people get outraged at the difference in pay that CEO’s make compared to the entry level workers. It’s as if they think that there is a fixed amount of wealth that just exists, somehow, that should be divided equally to everyone. This is a fallacy that no one should be fooled by. Wealth doesn’t just exist, it must be created. If one person makes more, it doesn’t mean another makes less. If one makes more, it usually a reflection of creating more to benefit others. We all equally have the natural right and responsibility to protect and defend our individual mind, body, and that which is created from our mind and body. We have the equal rights, but that doesn’t mean we all have attained equal value to the lives of others. That value (personal stock, or human capital) must be created, and personal, individual value is what we have an equal right to protect.
Are the CEO’s more greedy than the lower level workers? Greed is an incremental characteristic in all humans. We all want more than what there is. In a Statist society like America where coercion (regulation) is perceived as good and necessary , greed is usually used in an evil and immoral context. In America if you are extra greedy, all you have to do is be connected to the elite political ruling class, and you can benefit at the expense of those that are not politically connected. In a free voluntary society, if you are extra greedy, you must figure out how to add value to the lives of others, and create and provide products or services that benefit others. In exchange for adding value to the lives of others, you will be rewarded, usually with a medium of exchange called money. Of course in America, the elite political ruling class has a monopoly on the currency that can be used to exchange value. Having a monopoly on money is another greedy way to benefit at the expense of others.
I read an article supporting State regulation of income disparity within companies. http://dealbook.nytimes.com/2013/08/27/a-simple-solution-that-made-a-hard-problem-more-difficult/?_r=1 By the way, I don’t read this stuff to get an accurate portrayal of what’s happening in the world. With any news outlet of this kind, whether it’s the NY Times, MSNBC, or FOX News, I take it at face value, understanding the context by which it originates. Large media outlets like this are politically connected, and I take the information in knowing that it’s an artificial narrative that distorts any true representation of objective reality. The article did not explore why CEO’s make more, just that they do, and it must be corrected. It didn’t ask if CEO’s are of more value to a company than an entry level worker, only that there should be a law that prevents some from making many times more than another in a company no matter how valuable or expendable one is in a company. It amazes me that some folks blindly absorb things from the media without understanding the incentives and constraints that form the narrative based upon an arbitrary ideology that doesn’t stand on any primary logical principles.
It’s a bit of a fallacy to look at it as “one making more than another.” It would be more accurate to look at it as “one having more human capital than another.” In economics, we always try to see the hidden costs and hidden value, rather than the immediately seen costs and benefits. Malcom Gladwells books have also been good at revealing hidden value to readers that may not particularly be interested in economics.. Those at the top of a company will make more money because they make more value, and create more wealth than those in the entry levels. If you read my previous article – Big Bad Business – you would understand that CEO’s of companies that are politically connected don’t have to follow what the market demands. The market has to follow the demands of the politically connected. Many of those in the elite political ruling class are sociopaths, but any Statist society always rewards sociopathy. CEO’s of companies that are not politically connected must add value to the lives of others to make money, and they make more than entry level workers because they are able to add more value to the lives of others than the lower level workers that don’t have the human capital that the CEO has.
Of course, since the economy as a whole is awash in the sea of artificial incentives and constraints based on the toxic centralized regulations and monopoly of manipulated currency, companies and heads of companies can’t always make customer satisfaction the #1 priority. The priorities for companies in a centrally coercive society revolve around finding a place of refuge for any profit that has come from what those companies created. Government coercion is the primary reason why the U.S. Stock Market, and Wall Street are so big and out of control. The influence of the stock market would be much less to the overall economy in a voluntary society.
It’s not about how much money one makes. Money (in a free market, not the U.S. market) is just a medium of exchange that reflects the value that an individual has added to others. Entry level workers are more expendable because they have not accumulated the human capital that the top levels have. Increasing human capital takes a lot of effort and time. Those entering the workforce don’t have the experience, knowledge, and networking yet, and the wages are a reflection of that. If you want to get more money, you must increase your human capital so that you can add value to the lives of others, and the money made will be a reflection of that.
“But Jeremy, the products and services would not be provided without the entry level workers.” Yeah, I get it. A worker in a factory is producing a piece of a product that will add value to others lives, but the factory doesn’t just exist, somehow. The products, and the factory to make the products was created from the minds and ambitions of entrepreneurs and investors that were willing to take on the risk for a possible future return. The worker could do the same movements in his house, but it’s only by creating a factory and machinery that surround the worker that makes the workers movements of value to others.
Many ambitious entry level workers will make their way up to the top of a company by gaining experience, and education, and by making sacrifices that other entry level workers are not willing to make. It wouldn’t be fair to the ones that have made the sacrifices necessary to add value to others lives, to pay them less, and pay replaceable workers more. If you are a low level worker that has increased your human capital over time, and your employer rewards you the same as those that are more expendable with less experience, that is not fair to you. In that case it would be wise to find an employer that will pay you what you’re worth. It would be unwise and immoral to use the leverage of the state to force the company into paying you what you’re worth. It wouldn’t be genuine anyway. In the same way that it’s unwise and immoral to force someone to love you against their own volition.
If I pick up a violin and play in front of a crowd at Benaroya Hall, should I expect to charge what Hilary Hahn charges to perform? Or, does she deserve to get paid thousands of times greater what I should get paid because she has made sacrifices and dedicated time and effort that I did not choose to make?
I’m not saying that it’s always better to only increase your human capital. It’s better to live a life of balance and moderation that still adds to the value of others. I see a great amount of potential in the younger generation (especially in my nephews and nieces) to add value to the lives of others. It’s just troubling that they have to waste their valuable time imprisoned in compulsory schooling all day, year after year, when instead, they would be better off spending that time getting educated and experienced by exploring and interacting with people and places outside of the State conformity factories that teach blind obedience to arbitrary authority rather than volitional thinking. But, that’s an article for another time, eh?
Many CEO’s are off balance and spend the majority of their time working, rather than taking time off to spend with family and friends, which also adds value to those lives. It’s always rewarding to do things like self-education, gaining experience, and networking, with anything in life to increase your personal stock value. It’s also rewarding to balance that with a healthy dose of siesta, and fiesta time too.
