America's Middle Class and the Greed of our Bourgeoisie Overlords

The article I'm examining is a 'New York Times' article by Eduardo Porter. Despite what some of you may think, the NYT can put out some quality pieces. This article isn't about headline news, but rather a continuing trend that is occurring within America: the weakening of the middle class and the stratification of the Bourgeoisie. The article can be found here.

Porter, the author, starts the article by comparing our modern times to 1988. He shows that technology has progressed beyond belief, that the average production of Americans has risen, and, disturbingly, the economic prosperity of most Americans has stagnated. The median income in America, adjusted for inflation, has remained at relatively the same levels since the mid eighties, though there was a spike in the data at the end of the nineties.  Tangentially, the article fails to mention that these numbers are inflation adjusted, and it also uses the term 'typical' to denote median. Anyway, this is seriously concerning considering that both: the average production has increased, and the price of many items considered integral to the middle class; college expenses, home ownership, healthcare, ect; has risen faster than inflation. Porter points out the reason behind this. He shows the rich have been getting richer while everyone else has become poorer or remained the same. Porter also makes the point that what our nation considers middle class is increasingly becoming a fantasy. It is getting farther and farther out of most peoples reach. To demonstrate the increasing gap between classes, watch this video on Youtube. It is a very interesting piece detailing a study done by a Harvard professor.

I think something serious should be done to combat wealth and income inequality in the United States. Although what I'm about to propose may seem a bit drastic (and will no doubt receive tons of comments about), there has been other countries which have successfully done something like this. What I want to see happen is the salary of the CEO (and other executives) of any given company legally tied to the average amount of money that company pays its workers. So, in effect, the companies owners and executives will receive an incentive to pay their workers more money. They will get more money if they pay more and vice-versa. Perhaps if they cross a certain threshold, say Y x Minimum Wage, they could even get a small tax break on their income. Or, rather than tying it to minimum wage, perhaps we tie it to national median income. Give a tax break to CEOs (never have I ever said that) who pay a certain percentage above median income.

Currently there is no direct incentive for CEOs to pay better wages so most don't. I say direct because they do in fact benefit from paying their employees more money. Henry Ford payed his employees well and as a result he 'purchased' a loyal fan-base to buy his products. Most CEOs don't see eye-to-eye with this philosophy. If they were to receive some incentive, perhaps not even as extreme as what I'm suggesting, they would be more eager to pay their employees a better wage.

Now, some will probably think that this would be incredibly detrimental to our economy because we will lose job creators, and thus jobs. First lets examine the prerequisites required to open and operate a successful business.  First, and probably most obvious, the potential business owner needs some form of Capital. The definition of Capital I prefer is: Capital is anything used to generate more Capital. Hence, Capital can be anything from a good idea, to money, to gold. Second, there needs to be demand for your product. This prerequisite is far more important. One cannot simply open a business if there is no niche for that business to occupy. The amount of people in the economy willing to spend their money on product A needs to be quantitatively large enough to support the owner of product A. Thus, the less money people on average have within our economy, the less niches there will be for products A, B, C, and D. Increasing the amount of people willing to spend money, P, within an economy will also increase the number of niches, N, in the economy. The variables P and N are directly proportional. Therefore artificially increasing P will produce a quantitatively larger N.

Because N is the response variable in this situation,  it is pretty much impossible to artificially increase N itself. P needs to be increased to increase N. This is one reason why Supply-Side economics is inherently flawed, but that is another article entirely.

The point of that massive paragraph in abstract was to demonstrate that artificially increasing P by giving the proletarians more money (in the form of better wages) will by definition create more businesses. It will create, in abundance, the very thing potential business owners need the most to thrive: a market for their products.

Real quick, here is an article detailing what Switzerland did when they capped CEO's wages. Other countries also have regulated CEO wages but Switzerland's are the most extreme to my knowledge.

Overall, by increasing the pay check of the proletarians (aesthetically that word pleases me) it will do three things: one, it will decrease the income and wealth inequality in the U.S.; two, it will increase the opportunity for new businesses to flourish, and three, it will generate tax revenue and increase the rate our economy grows at. Other than the fact that CEOs are only going to be rich and not filthy stinking rich, there are no downsides that I can foresee with this.

You are more than welcome to comment if you disagree with my idea or need me to disambiguate something.