Inequality Among Corporations and their Employees

Rising inequality is a problem that has been touted by populists as proof of a broken system and explored by economists and social scientists of all disciplines. However, contrary to common misconception, inter-corporation inequality has not been rising (i.e. it isn’t the fact that the CEO is getting paid too much, even if s/he is that is causing rising inequality). Rather, decreasing competition and the rise of the internet giants has created a chasm between pay at an average company and a top-paying one. A college graduate starting their career at Google will earn an average of $133k while the average starting salary for a college graduate is only $45k. A significant portion of this may be attributable to skill differences and it’s difficult to pinpoint exactly how much inequality comes from skills gaps and how much comes from other factors, but the fact remains that some companies are able to earn significantly more income from their investments and those companies pay their employees commensurately more. This is important because the top 1% is gaining an increasing amount of their wealth from labor rather than capital. Further detail is available at a wonderful paper written by Furman and Orszag on whitehouse.gov (https://www.whitehouse.gov/sites/default/files/page/files/20151016_firm_level_perspective_on_role_of_rents_in_inequality.pdf)