What about a minimum ratio?
Years ago the janitor and the CEO had a difference in pay of what, a factor of 20 or 30?
Today it is as much as what, 500?
What if you could pass a law that said no two employees could have a difference in total compensation greater than a factor of 100?
Numbers are meaningless. 50 years ago 8 bucks an hour would have been a very good job.
My dad was a quality control manager for a factory in the early 70's and he made 300 a week. That's in the ball park of 8 per hour.
On that income they bought a house, raised a family, and had two new cars. Eventually he saved enough to go into business for himself.
Wouldn't it work better if we put it on ratios?
Well, I commend you for giving it some thought. That's more than most people do today.
But it wouldn't work, IMHO.
Back when your dad was a quality control manager, the American middle class was thriving because they had pretty much a world monopoly in terms of quality manufacturing. The rest of the world was still trying to "catch up" (Europe's factories were destroyed during World War II, giving the USA years and years of monopoly in terms of quality factory output). That's what gave rise to the huge and prosperous American middle class (the first of its kind in the world). The middle class was heavily comprised of factory workers who had little advanced education, and few truly honed skills. They worked assembly lines, drove trucks, operated heavy machinery, etc. But they enjoyed inflated salaries due to the American factory monopoly, with the help of labor unions.
But alas, nothing lasts forever. Slowly but surely, the rest of the world has caught up to the USA in terms of quality manufacturing. So our middle class factory workers are no longer worth the salary they were commanding way back when. And that's the reason for the decline of the middle class in the USA. We can no longer afford to pay blue-collar laborers great money for work the Chinese are willing to do for a fraction of the cost. It's just that simple.
So here's the real bad news: the middle class isn't coming back. It's going to keep wasting away until there is no middle class to speak of. Because in a free market society, to be blunt, uneducated and unskilled workers aren't doing jobs that are worth being paid house-buying money. Not in this economy, with all the international competition.
Yes, government handouts and labor union tricks will keep the middle class bubble pumped up with air for a while longer. But that bubble will eventually burst. And then there will be class-envy in America like never before.
So, it's not necessarily true that the CEOs of the world are being paid relatively more these days; it's that the middle class workers are being paid relatively less (and justifiably so).
That's free-market economics. I didn't make these rules, I just recognize that they exist.
