Almost every day now there is a news item about “the 1%”, talking about their increasing incomes. And right below the “1%” story there’ll be another news item about unemployment, and persistent wage stagnation in other job sectors.
Inequality is becoming a front burner issue for politicians, because so many voters are being affected. On a regular basis now the President talks about the need to “address inequality”.
Clearly inequality is asserting itself in the US, and other countries around the world, but what’s behind it?
It’s not the narrative in the Press about rich people being selfish and greedy. Greed and myopic focus have always been a part of making a lot of money, going back centuries. It is just more out in the open now that those generating wealth are doing it so easily.
It is also not outsourcing, although this has played a part. In the last ten years outsourcing is responsible for roughly two million jobs going overseas. The business owners and managers responsible for those decisions didn’t make them because they are heartless, or unpatriotic people. They made them because the level of productivity produced by the US based workers was available in another country at lower cost, and if those jobs weren’t outsourced now to keep the business alive, the jobs would be gone in the not too distant future anyway, when the business filed bankruptcy, unable to compete in the global marketplace.
Outsourcing has definitely put people out of their existing jobs, but it hasn’t stopped them from re-educating themselves, or acquiring new skills that are in higher demand.
These two issues have currency with the Press because they make for good news stories, and there are easily identifiable “good guys” and “bad guys”. But as usual with the Press, they are just whipping up fervor so you go to their pages and click on their ads.
The inequality of income that is reshaping Society today is not caused by Greed, or by Outsourcing. It is being caused by machine technology entering the workplace, and the increased ability of business owners to measure the performance of their employees.
Namely, how they measure value.
Inequality Is Being Driven By Machine Technology Entering The Workplace, And Employee Performance Being Precisely Measured
To get a fast track understanding of this, think about the world of professional sports. In 2015, John Lester of the Chicago Cubs, and Clayton Kershaw of the L.A. Dodgers, will each be paid $30 million for their services. The average MLB salary in 2015 is $3.8 million, and the lowest paid player this year will receive $58,237.
If you look at the NBA and the NFL the situation is basically the same.
The reason there is such a huge yawning gap between the very top and the very bottom, and why the average is closer numerically to the bottom than to the top, is that every single aspect of these athletes’ performance is being measured.
If you are a major league baseball player there are 16 individual statistics being generated by your performance on the field. Over time, taking into account streaks and slumps, your overall value to the team, and the contribution you make to the team winning games, will be revealed. There will be no way to spin it, it will all be in the numbers. And it is from those numbers the player’s “value”, what a club is willing to pay to acquire the player’s performance to help them win games, is derived.