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New study on CEO-to-worker pay ratio

One of the most memorable seminars I ever attended as a student was in a political philosophy course, in which one week covered debates about wealth stratification in ideal and real societies. We students were to submit short position papers about what we thought would be the ideal ratio of income inequality in a society. That is, how much gap would be necessary to inspire innovation, excellence, and risk-taking, while also not being so large that it would lead to societal breakdown, unjustifiable poverty, dangerous concentrations of power, or, at worst, armed revolution.[caption id="attachment_26974" align="alignright" width="300"] "No, no, dear. It's only 20 times more than yours."[/caption]As I recall it, the most left-wing students in the class were in the 10-to-1 range (200K income vs. 20 K income), and the more libertarian students rejected the very notion of an ideal ratio ("let the market do its thing, and let the people revolt if necessary"). There were lots of folks in the middle (20-to-1 or even 100-to-1).The real ratios of income inequality in the U.S. have become basically unimaginable since then (as in, I have real trouble imagining the fact that the one Walton family has as much wealth as the bottom 35-40% of our country). Discussion of these ratios has recently focused instead on individual companies. The data is easier to imagine and is, I think, more meaningful, since all the members of a company are, in some sense, working toward common goals and have very clear rewards for working toward them together.Yesterday Bloomberg news put out an excellent story and data infographic of current CEO-to-worker pay ratios. (Fortune did a smaller graphic last year.) In short, the ratio has grown by 1,000% since 1950. Many of us already knew that. What I did not know was that it has even grown since the financial crisis and Great Recession -- up 20% since 2009.The attention-grabbers are the top ratios, with J. C. Penney winning the inequality award at 1,795-to-1. (That's one loaf of bread vs. the Empire State Building, to help you imagine it.) The story profiles a sales employee as contrasted to the ousted C.E.O.But it's the overall picture that is worth pondering. Most real people do in fact retain drive for innovation, excellence, and risk-taking with much lower ratios than companies currently have. I have no doubt some of CostCo's employees are working hard to innovate and excel, even though they only have the "low" ratio of about 50-to-1.For those who often pine for the 1950's, the relatively low income inequality of that era should be remembered as a central aspect of overall stability. And the unprecedented income equality in our own era should be considered a bellwether of further instability.

About the Author

Michael Peppard is associate professor of theology at Fordham University, author of The World's Oldest Church and The Son of God in the Roman World, and on Twitter @MichaelPeppard.



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While helpful other statistics that I would find helpful would be... manager vs. food worker at fast food franchises, IT directors vs. data entry, foremann vs. assembly line (for the ones left!), construction boss vs. worker. I may not have the vocabularies correct, but I am trying to get at what differences there are that might be more reasonably achieved within groups... This is not to say that the current distibution is not the neo-gilded age!

If the purpose of the ratio is to stir up class hatred and warfare, I suppose this can be an important issue. If the purpose is to call boards of directors of publicly traded companies to responsibility, it's a necessary issue. But if the purpose is to help the plight of retail workers, I don't think it's where energies should be focused.

Why do people want so much money? 1795-to-1, for what? You can't eat more than your stomach's fill, can't stay under more than one roof, can't sleep in more than one bed and can't wear more than one outfit at a time. You cannot travel further than to the other side of the earth. Isn't consumption bounded by our personal physical limitations? Of course one can always pretend to need, say, a bed that is ever more comfortable, or a watch that is ever more fancy and costly, but it seems rather silly to me. The one thing that extreme money buys is power and influence. It replaces democracy by the power of the rich.

Jim, I would think inequality, at the levels it has currently attained, is a story regardless of the motives of whoever is "stirring" it up. And considering that the current "stirring" is coming from Bloomberg -- let me repeat that, Bloomberg -- News, it hardly looks like the statistics are being driven by class warfare. One might even suspect the statistics are driven by reality.I am sure you have a better place to focus our "energies." Perhaps we are not putting enough "energy" into making our tax system entrepreneur friendly. That will certainly create a lot of "on-call" jobs where employees are not allowed to work more than 30 hours a week, lest they trigger fringe benefits, but they must work their 29 hours whenever management needs them, subject to call on two hours' notice. A lot of our retail companies and restaurants seem to have achieved that nirvana. But maybe our further energies devoted to cutting their taxes will produce similarly joyful outcomes. Just saying.

It seems to me that a lot of the frustration of trying to establish "fair wages" is due to the fact that economic theory has to try to measure what is subjective (e.g., the appeal of products or the difficulty of work) and what is objective (most products), by some common measure. Consider a hula hoop. Let's say that it costs x-many man hours to produce and the work is work of X difficulty. Say that a new toy is introduced (let's call them "goofies"), and they cost exactly the same in man hours to produce as the hula hoops and the work is exactly as difficult. You'd think that the wages of the goofies workers should be the same as those of workers who produce the hula hoops. But let's say that when the goofies are introduced they are so popular that hula hoops lose half their market share, and profits dive. ISTM that since fair wages have to be tied to sales that we have an intrinsically unfair situation here -- the two sets of workers do the same sort of work, but they aren't entitled to the same amount of pay. In other words, a fair system of wages is not always one in which "fair wages" are necessarily "equal wages for the same work". So the very notion of a "fair wage" seems to be flawed, at least when we try to identify "fair" pay with "equal" pay. And if we can't equate fair with equal on the lowest wage level, how can we possibly hope to establish the fair but unequal wages of underlings and bosses? I have no idea what the solution might be except for starters to recognize that subjective and objective values seem to be incommensurable.

"That will certainly create a lot of on-call jobs where employees are not allowed to work more than 30 hours a week, lest they trigger fringe benefits, but they must work their 29 hours whenever management needs them, subject to call on two hours notice. A lot of our retail companies and restaurants seem to have achieved that nirvana. "Tom - your last sentence is exactly right: what you're describing here is pretty much the life today of a JC Penney retail store floor associate. Don't make me do math here again to show how 29 hours per week at minimum wage leaves a family of four stuck at the bottom of the economic well, so far below the poverty level that it can't climb out.Now, suppose we enact a cap on CEO salaries, such that it can't exceed, say, 300 times that of its workers (however that is calculated).My contention is that it won't do a darned thing for the wages of those retail workers, but will initiate heretofore unseen legal/financial gyrations by the guys whose wages have been reduced, as they seek ways to get their wages back to the level to which they're accustomed (and they believe they deserve).

Many, many years ago there was a study (I forget where) which showed that when unions negotiate new wage scales that hourly workers in one category will fight like hell to maintain their relative position in the wage scale, even when the differences are matters of pennies. In other words, wage satisfaction is in large part a matter of *position* in the work force, not just monetary reward. But these same workers simply don't care how much the uber-bosses make -- they seem to be outside the system as far as the hourly workers are concerned. These days, however, if the low level people get to see that humongous salaries for bosses affect their own wages, they might start to fight the system. But how? Most unions are weak these days and government isn't interested in fairness.

Very interesting.On a different topic; does anyone have any thoughts or concerns about handing out morning after (RU487) pills to 15-year olds without a prescription and without parents' approval?Is anyone concerned that a 15 year-old girl might buy the pills for her 13-year old friend?Can 15-year old boys buy the pills for their girlfriends?

Jim, we can't enact a cap on salaries. Not all income is salaries, anyway. And, Claire, the definition of a "fair" wage can never include a hard number -- fair is different in midtown Manhattan and rural Manhattan, Kansas. Which does not mean there is nothing to be done.We did not have a gap this big, and increasing when we had labor unions in this country. We had a gap almost this big, though, BEFORE we had labor unions in this country. So, duh. This is not a deep metaphysical problem. Msgr. George Higgins could have solved it while he was trying his shoes. Now, whether his solution is still possible is a function of the denatured media and the canonization of St. Ronald the Patco killer and of states taking from the poor to incentivize companies to relocate to them until a better offer comes along. But eventually, people will wake up to what's causing their misery. Or they will deserve it.

Tom - I agree entirely that organizing retail workers is part of the solution.

Hey, Michael - did that course include any philosophical writing on this topic that you could point the class to?

Ken: "Does anyone have any thoughts or concerns about handing out morning after (RU487) pills to 15-year olds without a prescription and without parents approval? Is anyone concerned that a 15 year-old girl might buy the pills for her 13-year old friend? Can 15-year old boys buy the pills for their girlfriends?"Yes, I think this is nuts. But I have no idea what to do about it. I also think the sexual mores of teendom, maybe even tweendom, feeds into the topic of this post. Economic inequality starts early (at birth), continues through bad schooling, and culminates in girls (and boys) not finishing high school. I don't think the morning after pill is going to solve this problem--all arguments to the contrary, but perhaps exacerbate it by giving half-formed minds (on how to calculate risk) a false sense of sexual security.Do you have a plan?

If I were faced with a choice of working for a) a company where the CEO was paid a loaf of bread and I was paid a slice of bread or b) a company where the CEO was paid enough loaves of bread to fill the Empire State Building (and assuming no laws were broken) and I was paid one loaf I would make the latter choice.I distrust surveys that ask about ideal ratios. They almost always assume a happytalk assumption like "innovation would not suffer under smaller ratios." If we allow happytalk assumptions like that then I get to assume my CEO is becoming filthy rich because his company is doing something socially beneficial. Perhaps the company is about to find a cure for cancer. Maybe the CEO will spend his money discrediting the progressives' favorite bogeyman (or bogeywoman).I pay more attention to the revealed preferences of individuals, how they act rather than how they respond to loaded questions on a survey. How many people look into CEO-to-average-wage ratios before accepting a job? How many turn down a higher paying job because the Gini index within their company is above an arbitrary range?

Jim P., I don't think I could find that syllabus, but it was a "classics" of the field kind of syllabus: Adam Smith; Karl Marx; Robert Nozick; John Rawls; etc. It was an undergraduate class.

The point of the ideal ratio was to do our thinking about the "ought" and then compare it with the "is" of the data that we studied. Everyone was surprised by the actual ratios and how they have changed over time. That was the point of the exercise, and why I still remember it. Similar things have been done recently with U.S. attitudes about income graphs. The most famous study is here (I think behind paywall): A summary is here: don't know what a "happytalk assumption" is, but we don't need assumptions because there are lots of data, the most relevant of which are the data of our own country's history. The "rising tide" did "lift [most of the] boats" from roughly the 50's to the 70's, but since then, only the top quintile (or less) of U.S. citizens have gone up and the rest have stagnated. This is, in part, because of greater income inequalities within corporations that, when scaled up, led to grand inequalities overall. I don't think those facts are controversial. As for potential employees checking these kinds of things out, no, most of them probably don't. But they are indicative of a culture that employees do check out. The contrast between Costco and Walmart on these issues is the one cited most often. A Costco job is the closest thing to a good-ol' days 1950's middle-class industrial job as there is right now in the U.S. (he said, overconfidently).

An example of a happytalk assumption: we can reduce CEO to worker pay ratios without sacrificing economic growth or absolute levels of pay. On the other hand suppose one has to make difficult tradeoffs. One can reduce the ratios when the high and mighty and the lowly both lose but the high and mighty suffer more severely. Is that desirable? Or is it really terrible if we go from a 100 to 10 ratio to a 500 to 40 ratio? Should the lowly prefer not to move from 10 to 40 if the rich go from 100 to 500? When those alternatives are presented I don't think the "ideals" are necessarily a good guide. Too often they apply only to a fantasy world.I think there's also often a hidden assumption in these comparisons, namely that the rich get rich by exploiting the poor. What if that's not the case. And I alway watch for the definition of "exploit;" it can be very elastic.

Thanks for this. It's probably worth repeating that the primary reason labor unions have less power now than they did in the mid-20th century is because the laws have changed, making it virtually impossible for workers to organize a union. There are more recent books that cover this topic, but Thomas Geohagen's 1991 memoir, "Which Side Are You On: Trying To Be For Labor When It's Flat Own Its Back" is still well worth reading.

"A society that fails to pay a fair wage or one that seeks only personal profit is unjust and goes against God, Pope Francis said in a May Day message Wednesday...Pope Francis concluded by calling on people to listen to the voice of God, as when he spoke to Cain in the Old Testament and said: "Cain, where is your brother?" Today, he said, Gods voice says: "Where is your brother who has no work? Where is your brother who is subjected to slave labor? " May Day, people.

"An example of a happytalk assumption: we can reduce CEO to worker pay ratios without sacrificing economic growth or absolute levels of pay."Well, Mr. Molloy, there is J.C Penney, mentioned above. Investors (see stock prices) seem think there has been a problem with economic growth there. If they are having trouble meeting their growth needs while leading the pack, would you pile more money on the leader and really expect that to help the company? Stock market suggests: No.You seem to think criticism of our Gilded Age wage gap (Manhattan > Swaziland) is somehow morality based. Mine isn't. I learned a long time ago there is no percentage in arguing morality with people who deify markets. There are economic problems with the gap we have it well.

Owners of stock in a company do have control over some CEO salaries. The problem is when companies are largely owned by major owners-executives and -- listen up -- when people like you and me don't send back those proxies to our brokers to vote on matters benefitting everyone including the little-guy-owners. I confess I file those things in file 13. Does anyone know whether it would really make a difference if all the people with investments (including investments through brokers and retirement plans) sent that stuff back signed? Have there been any reliable studies done?

Mr. Blackburn,You misunderstand me if you think I deify the market. But I don't automatically demonize it. Perhaps you mistake that position for deification. In my view the wage ratio may be 200 to 1 and the CEO can be underpaid; or it can be 2 to 1 and the CEO can be overpaid. Poorly run companies where CEO's are overpaid deserve to go bankrupt. Likewise Solyndra type operations subsidized by the government on the theory that our leaders need to chart a new path. It's just that I don't swoon when I hear that aggregate ratios have changed. Usually there's an equity/efficiency tradeoff that needs to be considered before turning to WWII times as a standard good for all time.And I will believe that academic critics are seious when they stop accepting jobs at Harvard because they object to the President/ janitor wage ratio as exorbitant. In the long run, I believe reducing the aggregate ratio will only hamper those companies where the ratio is insufficiently high unless the government can choose wisely. You can probably guess I fear the resulting political inequality much more than economic inequality. I don't have to read Bloomberg's magazine but I do have to pay taxes for his crazy ideas.

What really gripes the blankety-blank-blank-blank out of me about our current capitalist system is that many corporations pay NOTHING in profits to the shareholders. Money is made on such stocks only by buying and selling them. That just fuels the non-productive financial industries with all their particularly outrageous salaries and bonuses. Apple, with its hundreds of billions of dollars is finally paying a small dividend. Sheesh.I think that economics should be a required subject in the high schools. Otherwise the system cannot work. Too many people don't even know which questions need to be asked, so they can't possibly know which political party or candidates to support.

Here's my loony idea: we lower the ratio (which, btw, tells us nothing meaningful, and according to the Bloomberg article, doesn't even tell us what the Bloomberg article tells us it tells us) by bringing about labor market conditions such that workers are in-demand and are able to bid up the price of their labor.

@Patrick Molloy (5/1, 5:21 pm) "In the long run, I believe reducing the aggregate ratio will only hamper those companies where the ratio is insufficiently high unless the government can choose wisely. "Which companies today have an aggregate ratio that is insufficiently high? And how has it hampered them?

"In the long run, I believe reducing the aggregate ratio will only hamper those companies where the ratio is insufficiently high unless the government can choose wisely."Who said anything about the government choosing anything? As Jim Pauwels (no shill for my leftwing notions) suggests (6:23) if workers as a group had a real bargaining position (as they did after WWII, when, pardon me, the economy worked better for everybody than it does now) the problem could begin to resolve itself.As we are constantly lectured by people who don't automatically demonize markets, just throwing money at a problem won't solve it. That includes problem CEOs.

Intelligent people in this day and age do not really care about ratios and what the lower paying jobs make because the intelligent people gravitate to those industries in which the pay is very high, the perqs are amazing and the income potential, i.e., incentive/variable/stock option or grant income, can be stratospherically high.Why do execs lust after so much money? Because very high income is the visible end product of achieving power.Why do people who can, pay $3,000 (or comparable for the women) for a suit when a $300 suit would serve the same purpose? Status symbols. Ditto for high-end autos, shoes, homes, trophy spouses, etc.Why are nerds willing to work obscene hours here in my lovely SF Bay Area for truly amazing work perqs, quite unstructured working conditions and the often far-fetched possibility of (literally) becoming millionaires if their company grabs the next brass ring? These kinds of jobs appeal to their sense of creativity, innovation, lack of interest in structured work environments, and the old Horatio Alger story.I spent many years working in the areas of compensation and benefits and before I retired 10 years ago I noticed huge swings in what motivates whom. The old things still have meaning (cash, benefits, perqs, variable income) but the younger people assume that these things will be there and they want what factory, service and part-time workers cannot ever expect because of highly controlled nature of what they do.

Luke Hill,The aggregate ratios in the Bloomberg article, in my understanding, refer to a weighted average of the individual ratios for some select (top 500) companies. No single company has an aggregate ratio.But if you are asking for examples of companies where the individual ratios are insufficient then my response is that it takes close and practical knowledge of particular situations. To take Penney's, the poster child of horrible ratios in the article, my calculation is that the CEO multiple of 1,795 in 2012 fell to 64 in 2013. I have no practical knowledge of Penney's situation but it's conceivable to me that if they hired a reputable turnaround wizard at an obscene wage package employee could benefit, even if the ratio skyrocketed.Can you tell me what the proper ratio should be for Apple? or if the IBM multiples increase over WWII levels at what point do you get indignant and pronounce the situation intolerable? Please show your math.

Patrick ==If Steve Jobs was paid an outlandish amount in $ and stock, then, as an Apple fan, I'd say that could be justified. But Jobs was the most conspicuous exception you could find. He and Wozniak revolutionized the world and *positively*, He rescued people from deadeningly boring jobs and made possible the creation of many new ones, not to mention the fun factor of Apple's products.Compare Jobs with the top brass of some of the investment banks which did more harm than good by any measure. Yes, yes, I know that start-ups need capital and investment banks make it available. But they also indulged in the derivatives scam which has plunged the world into recession if not depression, and yet those guys are making even more now than before.Something is wrong, wrong, wrong, and I mean morally as well wrong with the system when such incompetence is not just tolerated but rewarded.

@Patrick Molloy (5/1, 9:50 pm) Thanks for your response.Speaking economically, it's my understanding that there's a growing body of economic research that indicates higher levels of income and wealth inequality are associated with boom-and-bust-type economic cycles.Speaking morally, there's a reasonable and common argument that high levels of income and wealth inequality are, at a minimum, less than optimal.Speaking politically, I'm reminded of former Senate Majority Leader George Mitchell who, in his usual calm, clear and understated way, would observe (paraphrasing) that all societies in human history have redistributed wealth, and they have all done it in one of two ways: taxation or revolution.

Ann,I believe most people are willing to allow many IT gurus, not just Steve Jobs, huge salaries. But what bothers me is that armchair critics who know nothing about a company like Penneys pontificate about what the legitimate levels of its CEO's compensation should be. There is no principled way to draw a line. I would not be concerned if the CEO of Penneys earned at least as much as Lady GaGa.Regarding the financial industry I wonder if you are not more concerned with illegitimate bailouts and not absolute levels of reward when accompanied by social benefits. I would like to see the compensation of index fund managers increased so that more wizards would be attracted to that sector. And again, I wouldn't care if the multiples that have spooked the Bloomberg authors increased as a result of this socially beneficial (IMHO) change.BTW, economist James Galbraith claims that the entire recent increase in inequality can be traced to 15 counties: Manhattan, parts of Connecticut, Silicon Valley, Seattle (Microsoft), and a few others. I would bet the DC suburbs also contribute. But in the rest of the country little change.

Luke,You are asserting rather than arguing. I'm not persuaded, though I agree your views are widely held. Forgive me if I find George Mitchell's pronouncements less than authoritative.

Mr. Molloy, You are defending your wicket very well, but you still have to hit the ball as it is bowled. I can't see any contributors to this string pontificating about "legitimate" levels of compensation. You seem to have a level in mind, and it seems to be higher than this country's historic levels. And you are worried about a CEO who might not make as much as Lady Gaga. That's income.The rest of us are talking about the gap. It is not good for social solidarity. It is not good for families on the wrong side of the gap. It is not good for companies in which decisions are made by people with no earthly idea of how their customers live. And, yeah, it is a sign of social sin.If I were to try to establish legitimate levels of compensation, I would be inclined to pay your turnaround artist more -- if and when she actually turned the company around -- than the guy getting a big payout for running his company into the need for a turnaround because that's what his peer group gets. But that is a whole other set of questions. As the Brits say, mind the gap.

@Patrick Molloy (5/1, 11:03 pm) Again, thanks for your reply. I thought I was referencing (in the first two cases) reasonably solid bodies of data and research, not merely asserting. (Oh well.)There's no need for you or anyone else to find Mitchell's observation "authoritative". (On the other hand, if there's a third option for redistributing wealth that societies have utilized throughout human history I, for one, would be interested to hear about it.)

Luke Hill,Another way: establish incentives that favor economic growth. For further details see Adam Smith and any reading list in economic history. Or examine some of the dramatic recent success stories in underdeveloped countries. There's been substantial progress in all parts of the world if one wants to look for it, perhaps not fast enough by your standards, and not universally successful, but steering a path between redistribution / heavy taxation and revolution. Workers of the world, put aside your Bloomberg tracts - you have nothing to lose but your slogans!

@Patrick Molloy (5/2, 8:20 am) Thanks, but "incentives that favor economic growth" don't necessarily deal with the issue of how wealth is distributed in a society. Over the past century in the US, the era that saw 1) the fastest sustained economic growth, 2) the least disparity in incomes and wealth was the generation from 1946 - 73, when incomes basically doubled for all economic quintiles of the population, with the fastest growth in the lowest two quintiles.That may or may not have lessons for today. It's indisputable that the past generation has seen slower economic growth combined with increasing wealth and income inequality.

We've seen substantial growth in parts of the world, but not substantial social development as popes from Leo XIII to Francis or economists from Adam Smith to (fill in the blank; I don't want to start a sideshow) would understand it.

All this talk about organizing workers is great, but let's be realistic: Unions are often hampered by "right to work" laws (like Michigan's brand spankin' new one!), and unions often represent a small fraction of folks who should be in the bargaining unit because its easier to get admin to pony up for full benefits and higher pay for a few than for many. Go to any American college--large, small, private, community--and you will see an increasing percentage of adjunct who are paid much less than tenured or full-time faculty, and who are not represented by the faculty union. Often adjunct are not offered benefits, or must pay premiums they can't afford to buy into the plan. I have a colleague who works at one college for the benefits (which takes virtually all her pay) and at my college for the income. If she is not teaching at College #1 in any given term, she is not eligible for insurance, so she has to have all her medical stuff done during terms when she is teaching. Problem is, she has no sick days, so will be docked for any days she might have to take off for medical procedures. If she gets really sick and can't come back for a term, she loses her coverage. If work peters out at College #2, she has benefits, but can't pay the rest of her bills. Both of us have been assigned courses to teach, only to have unionized faculty bump us out of them because theirs failed to fill (even though our performance reviews are very high).In addition, earning potential for adjuncts is dwindling at many colleges b/c administrators don't want to have to pay health insurance for adjuncts under Obamacare rules. So they've cut the number of courses that adjuncts can teach, thus reducing the ability for adjuncts to pay out of pocket for medical care.I've tried to organize, and Our Young People are very chary of unions. They think that if they're good boys and girls as adjuncts that they'll be rewarded with cushy full time jobs. They also don't think unions do much good ... and about that they're more right than they know (because unions often don't include part-timers in the bargaining unit).Yeah, yeah, quit whining and go work in the private sector, Jean. I'd love to. But I'm almost 60, and I was lucky to find the measly employment I have. Happy May Day.

"The rest of us are talking about the gap. It is not good for social solidarity. It is not good for families on the wrong side of the gap."Those are legitimate concerns. But surely the solution is to improve the employment and wages of those on the wrong side of the gap, yes?

Speaking of JC Penney, here is its attempt to recover from its scandalously overpaid CEO:

My last contribution: The same type of exercises that Peppard cites (re ideal ratios of inequality) have been carried out re ideal maximum tax rates. Respondents usually cite rates that are woefully insufficient to achieve redistributional nirvana. I wish our redistributionists would tell us what rates they think are required, and why they would not impede innovation, excellence and risk-taking (to repeat the same provisos in the original exercise). We would learn something about the tradeoffs they are prepared to make and which a good many in the real world might find less than optimal, to invoke another popular standard.

And one more article snatched from the front of the business page, and filed under, "What "for the love of Mike were they thinking?":

My last contribution: Markets could solve most of the problems of inequality if workers, or their organizations, could compete on an even playing field. The winning side of the gap now has the political influence to keep the field tilted in its direction, so government is not the solution. I never said it was (at least not since Reagan showed how easily the modern union can be crushed).

"It is not good for social solidarity. It is not good for families on the wrong side of the gap. It is not good for companies in which decisions are made by people with no earthly idea of how their customers live. And, yeah, it is a sign of social sin."Bravo, Tom Blackburn.I would also add, the greater gap is becoming permanent and reducing social mobility. fact that the true extent of the inequality is not widely known is part of the problem.The charts here are instructive:

Today's tweet from Pope Francis "My thoughts turn to all who are unemployed, often as a result of a self-centred mindset bent on profit at any cost."It's causing just a little bit of a stir among the banker-dudes.

Irene - that is an extremely interesting article, and the reactions to his tweet are quite interesting, too. People with a social conscience, and business leaders, should get together and have regular dialogue. Twitter isn't the best forum. Calling one another greed-heads and socialists doesn't really accomplish much, either.Too many corporate leaders don't know anything about Catholic social teaching, and too many social activists don't know anything about business or economics.

Patrick: if you use "executive pay" and "legitimate levels" in the same sentence, then you know nothing of the chicanery behind how executive pay is determined.I do.

"People with a social conscience, and business leaders, should get together and have regular dialogue."I'd be interested to know what possible incentive business leaders and high-level administrators would have in dialoguing with "people of conscience." In my experience, the less your boss pays you, the less respect he has for you. I remember being in a meeting with my former CEO who made an offhand comment about "losers who can't find a job that pays more than $35,000" ... which was exactly what he was paying me. I excused myself to go dust off my resume. High-level business leaders also believe that they've "earned" their privileges because of hard work (and if you're poor, you haven't "paid your dues"). The reality is that upward mobility based on merit and hard work is less common in the U.S. than people think it is ... and so is downward mobility.Pew has done extensive studies on this. This page has some interesting links:

Christians in name only like to use scare tactics by calling those who seek social justice for the poor as "socialists." Advocates for the poor support capitalism. It is when banks scam the poor and companies lobby to not raise the minimum wage that Christians get alarmed. As talented as Microsoft was/is it was still merciless towards competitors because of its windows monopoly. Companies need to be regulated because of greed and ruthless tactics. Because too many of the greedy have the lobbyists the impression goes out that advocated for the poor are socialists. Companies who complain about the health care law are being disingenuous. They do not like the free market when they cannot manage it. Jesus mentioned the eye of the needle for a reason. Money still is the root of all evil. Francis of Assissi made that point and this Francis is reminding us of it. People who do not care for the poor will not be viewed kindly at the judgment. Matthew 25. They certainly should not pretend to be Christians.

Bill: actually it is the LOVE of money that is the root of all evil (1 Tim 6:10), but, in this day and age, that is a distinction without a difference.

Just a few truisms.1. Economics deals with human performances and choices. These performances and choices are imputable to those who make them as praiseworthy or blameworthy. 2.These performances and choices are reflected in deliberately adopted policies.3. Present policies in the U. S. and many other nations consistently result in serious undeserved and unnecessary hunger and health problems. That these problems exist is unjust.4. All of us who benefit from these policies bear some responsibility for the injustices they produce and have some responsibility to reform them.At the very least, this means that we all have to recognize the injustice that is the outcome of these policies and to support efforts to reform them. That there are no perfect policies in sight is no reason not to keep looking for better policies. Of course, there could be worse policies, but that fact in no way mitigates the injustices produced by the prevailing policies.Simply to acquiesce in the present policies is to treat them not as the outcome of human doings, as they obviously are, but to act as though they are somehow "laws of nature."Given these truisms, I have to say that I cannot see any justification for policies that lead to exorbitant wealth for some (however acquired) in the face of the drastic poverty of others. The very wealthy are simply not entitled to such wealth when so many other people are in need. All of us have an obligation to say so and press however we can for a fairer distribution of the financial and cultural resources available in our society. Longstanding and complicated injustices remain injustices for which we bear some ongoing responsibility.

Readers may be interested to learn that, a few days ago, RR Reno at First Things posted (from his conservative point of view), some ruminations on the reality of increasing income inequality., Robert T Miller (another economic conservative) posted a reply.

"Id be interested to know what possible incentive business leaders and high-level administrators would have in dialoguing with people of conscience."Some of them (quite a few, in my experience) are persons of conscience themselves, albeit not always particularly enlightened. I.e. they'd like to do the right thing, or at least like the idea of doing the right thing, but perhaps because they live in a bubble, they don't really understand how the other 9/10 lives and its implications.In addition, there is the question of social solidarity. A lot of business leaders understand the importance of keeping the community more or less on their side. They may see it in their own self-interest to listen.

Bernard, Thanks for laying that out so clearly. The very important point you raise at the end bears repeating: "The very wealthy are simply not entitled to such wealth when so many other people are in need."Wealth, goods of the earth, are for the purpose of meeting needs. We forget that.

JIm P. --I agree with you that many businesspersons are persons of conscience, but they often just don't know not just *how* the other half lives but *how many* people there are in the other half. Another good reason to require economics in the high schools, not just facts and figures but the reasoning behind economic policy, such as it is and isn't.I read just this morning that Amartya Sen, the great economist, was 10 years old before he found out that there were many people in India who were starving. He wasn't a rich Indian, just lower middle-class. It gave him a life-long interest in the causes of starvation, and the non-causes as well. He discovered, for instance, that lack of food is not the problem. The cost of food is typically the problem.

"Given these truisms, I have to say that I cannot see any justification for policies that lead to exorbitant wealth for some (however acquired) in the face of the drastic poverty of others."Well, when you put it that way...When I type the word "exorbitant" into Google, it gives the following synonyms:"excessive - inordinate - extravagant - undue"I ask this in all seriousness: is there such a thing as due wealth - as wealth that is not exorbitant? And if we deem that some class of business owners or professionals or heirs or pop stars or lottery winners has non-exorbitant wealth, must their wealth also be redistributed?Should the wealth of the exorbitantly wealthy only be given to those in drastic poverty? That's actually a pretty small part of the population, percentage-wise.If it turns out that the accumulation of exorbitant wealth isn't a zero-sum game - that its accumulation is only weakly connected, or not at all connected, to the plight of those in drastic poverty, should your statement be revised?If it turns out that redistributing the wealth of the exorbitantly wealthy to the drastically poor doesn't materially improve the plight of the drastically poor, should we then conclude that it is imprudent to redistribute that wealth?

@Jim Pauwels (5/4, 10:17 pm) Some quick (perhaps too quick) answers to your questions:1 - Yes, there's non-exorbitant wealth. No, it doesn't have to be redistributed. (Although perhaps we should check with the poor for their judgments on this matter.)2 - No, excess wealth shouldn't be returned only to those in drastic poverty. It should be returned to all from whom it has illegitimately be taken. (Who that is, and how it's to be done is another conversation.)3- Actually, it turns out that the accumulation of exorbitant wealth isn't a zero-sum game...but in the opposite direction from the one you suggest. There's a considerable and growing body of economic evidence that high degrees of wealth and income inequality generate slower economic growth and greater economic instability. 4 - Yes, but the overwhelming majority of economic evidence points to the contrary conclusion.

"A lot of business leaders understand the importance of keeping the community more or less on their side. They may see it in their own self-interest to listen."Yes, of course that happens occasionally. Nike apparently learned from its sweatshop debacle, though other companies apparently have not (see any sad tale of women dying in garment factory fires in Bangladesh leaving a trail of charred American brand labels in the ruins). Moreover, I wonder whether an American society that is increasingly struggling financially has the will to work up outrage over criminal labor practices. In any case, real moral discussions about labor practices among the captains of industry are generally turned over to PR hacks, of which I was one once upon a time. Wal-Mart distracts attention from its purchase-from-sweatshop practices by claiming that their prices are so low that they've effectively given everybody who shops there a something-percent salary raise. The more a business relies on local labor, the more likely it is to meet local wage and benefit norms to maintain good community relations. But these businesses are in constant jeopardy from large multi-nationals that can set up or purchase from offshore factories where working conditions are out of sight/out of mind.Yes, I agree that some business leaders want to be people of conscience, and that's why they created the bubble in the first place. I see no reason why they'd want to leave that circumscribed world where they're seen as upright pillars of the bubble community to face up to business realities that might be very uncomfy.

Thanks, Luke. Jim P.,, in all seriousness. Sometimes in history, a political or economic policy that has been billed as providing a much better and more just fairer distribution of resources to the members of a political society turns out, after a period of time to have been a mistake, even a disaster. The French philosopher Maurice Merleau-Ponty once supported the Soviet political and economic policies but in due course found that they had utterly failed to live up to the billing they had received. The kind of seriously underregulated capitalism we have experienced in the last decades, under various headings, such as "supply side capitalism" or free market capitalism has consistently produced growing inequities both here and elsewhere. To insist that these policies will IN TIME work out well, all presently available evidence notwithstanding, is hard to accept. I have to admit that I don't have an alternative to put forth, but that does not make the case in favor of what's presently in place, any stronger. Rather, it gives me reason to encourage technically competent people to work for alternatives.Take one example. If Wall Street Journal reporting is to be taken as representative of prevailing capitalist views, then the capitalist's task is to make sure that as few employers have to provide health care coverage to as few of their employers as possible. Hence the pressure to make sure that as few employees as possible work as much as a 30 hour week. Under this sort of capitalist flag, there will be an unending "race to the bottom." This example is not, regrettably, atypical.In sum, I have no good reason to see in the prevailing capitalism any movement to "self-correction."

Bernard --As some of us see it, the WSJ is unredeemably conservative in its editorial pages but progressive in its reporting. How it can retain this schizoid mish-mash of opposing attitudes is a true wonder. Then again, maybe it succeeds because the American culture is a mish-mash of basically conservative principles (individualism, right to the fruits of one's own labor, respect for physical force, loyalty to the past) versus progressive/pragmatic responses to matters of fact. I dunno.

Many of the wealthy already benefit from redistributed income:Mortgage interest deductions for any number of properties.Tax shelters.Charitable contribution write-offs."Carried income" very low tax rates.If they are business owners, accelerated depreciation schedules.Tax write offs for private aircraft .. a "business" expense.General liberal interpretations, all allowed in the tax codes of course, of what is a legitimate tax deductible business expense.The ability to shelter certain kinds of current income until a later date when your tax situation may be more favorable to you, even though you have current use of that income.And, if I would bother to take the time I'm sure I can find more.Their tax benefits are paid for by countless others who do not have the political or economic "juice" to structure good deals for themselves.So don't talk to me about income redistribution: it happens on a grand and priviliged scale already. And these people didn't even have to attend that new school for the priviliged mentioned in the posting above.

When a number of large corporations went to the government for a bailout during the recession a few years ago, one of the first things the American people wanted curbed was executive compensation. A business that unsuccessful miserably and wanted TARP help shouldn't be lining already padded pockets. However, a brand new report has found executive compensation slightly dipped even while a number of firms, such as General Motors, AIG and Ally Financial, were receiving TARP funding. Get more details here.

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