All over the world, there is a gap between people who earn too much and people who earn too little.
The gap varies depending on the country you are in, but sadly, it is widening more and more every day.
They are playing a whole different game
There have been studies aiming to investigate income inequality and see if people have an actual understanding of how wide the gap is.
They would go on to ask different employees at various positions around the company how much they thought the CEO, CFO, or any other high-income executive in the company were earning.
Normally, the answers range between 2-5 times what they were making, so they thought.
If I’m making $2,000 USD a month, probably the CFO would be earning around 6k-12K a month,… right? WRONG.
They were missing out by a LOT.
Let’s take, for example, a Disney employee, which I know has a variety of roles, but digging into it a little bit, the average salary is around $2,909 USD a month.
Based on that information, they would assume high executives are paid around 5K-16K a Month, probably some are a little bit more, but no one could be in excess of 100K a month max, right?
Well, Disney’s most recent CFO, Hugh Johnston, is receiving around $160,000 USD per month, plus bonuses. That’s a 55 times difference (without counting bonuses).
What about Disney CEO, the famous Bob Iger?
Well, he is receiving a whopping $75,000 USD per month. Well, that’s not so bad, is less than the CFO, well yes and no.
Because with the “Compensation and Bonuses,” his salary is around $2,583,000 USD per MONTH, or a whopping $31,000,000 M a year. That’s a 10,000 times difference.
The thing is, we could argue that both of those guys earn more because they add more “value” to the company, they have whole teams of people they are in charge of, heck, the “whole” company depends on them, right?
Well, probably there is a point to be made that they are people with lots of experience in their roles, that they are great at what they do, and that their skills and knowledge are very well worth a lot!
I’m not arguing that point, I’m not saying they should be earning the same as a cast member or a visual artist, etc.
The point I make is, are their skill and knowledge really worth a 50 times, 100 times difference in pay? Who decides that? Who says oh yeah, these skills and knowledge are 5,000% more valuable than the people who operate the parks, make the movies, make sure every part of the Disney “Magic” is there.
You do understand that without those people, there would be no Disney, so why that HUGE income Gap?
That’s what I’m arguing, why not cap it? At 20x-50x- etc.
The problem is prevalent among many parts of the world, 3rd world economies in Latin America suffer even worse discrepancies, with very high levels of severe poverty.
It’s not just about wages
Income inequality is a problem that has different moving components that make it a far more complex issue to solve than it may seem at first glance.
Let’s take, for example, asset value, people who are in the poverty line don’t own any assets, they are just surviving. The middle class biggest asset usually is their home.
This also favors the people who have the most, as if one person has 8 houses, and the value of housing is just going up dramatically, far outpacing wage growth, the gap widening increases.
Leaving people who own zero properties with a much more difficult situation in trying to get one.
Let’s take, for example, Vancouver, Canada.
There is a huge money inflow coming from investors overseas, mainly China. They buy the properties, pay high prices for them, inflate the housing prices and then the market enters into a bubble territory.
Why? Investors who have a ton of money from all over the world are buying the properties in which all of the Canadian workers and members of society need to be living!
Making rents and house prices go through the roof!
Needless to say, the wage growth for Canadian workers can nowhere near get close to the asset price growth of housing, making it an impossible dream for many to own a home.
To put things into perspective, the average price for a house in Vancouver is $1,124,400 CAD, with the average annual salary at $97,534.
That’s almost a 12 times multiple on the yearly salary to buy a house.
In other words, supposing people could save all their salary and wouldn’t even be spending on basic needs, it would take them 12 years to save for a house.
Years ago that multiple was around 2-4 times, the gap just widens more and more.
Central Banks should be aiming to regulate this housing problem, they should be aiming to also manage to get inflation under control, not printing money and debasing everyone’s currency which only makes this whole problem WORSE.
Who make the rules?
In the end, it’s clear that the rules are made to favor the ones who have more and as politicians normally get “rewarded” for doing so and they are the ones who make the laws.
Well, pharmaceutical companies funded and “donated” lots of money to the political campaigns in the early 2000s and then surprisingly a law that stated that the government could not intervene in the pricing of medications in the US.
Meaning pharmaceutical companies could manufacture some diabetes pill for “$1 USD and sell it for $220 USD and the government has no saying on it.
Is there any surprise then that the price of healthcare and medication in the United States is through the roof?
Unbelieavble?
The same happens with wages, there already have been attempts to cap the salary of the high-end executives at companies, guess what was the result?
They just find loopholes around, bonuses, compensation packages, etc. So they continue to stick by the law and still getting what they want.
The interesting part is that although income inequality is prevalent all over the world, there are still differences in how governments treat and help the people at the lower levels.
We have the case of China, objectively speaking they managed to get out more than 500 million Chinese out of poverty, they still have other issues and income gaps but at least they managed to help their citizens.
While we still navigate this complex system, the best we can do is learn to play the rules of the game, not just complain about them.
At the same time, doing the best that is in our hands to promote a better future for the most amount of people.
Take care,
Much love,
Zifush