Income inequality in America over the last 30 and 100 years
Income changes 1950 to 1980 and 1980 to 2007, by income group
http://1.bp.blogspot.com/-RBJ23r3jdSo/UTDBK7FislI/AAAAAAAAAdA/qhk6gNcatv0/s640/Family+income.jpg
Income changes since 1970
http://3.bp.blogspot.com/-EoQdjasE9Bo/UUIXP4DIr9I/AAAAAAAAAdo/Lgtki5BZTHY/s640/income+changes+since+1970.png
CEO to average worker pay 1980 to 2010
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When there are relatively small income discrepancies and a thriving middle class, the economy grows at it's fastest pace, e.g. in America in the 1950's and 1960's.
When the disparity grows too large the economy can fall off a cliff (e.g. 1930's) or we tend to get a stagnant economy (like now).
The main factors in play for the recent large increase in income disparity are :
Legislation that favors the rich
The current over $1.3tn a year of annual Corporate Welfare
The current over $1.2tn a year of handouts and bailouts to the big banks
Massive money printing by the Federal Reserve (now $1tn a year), which pushes up inflation on basic things that disproportionately affect the poor compared to the rich - food, energy etc.
N.B. Executive pay has risen so much in the last 30 years because there is no longer any control over it.
50 or 100 years ago most companies were owned by a small group of people - a family, or a small group of families, or a small group of major shareholders.
This structure meant that executives were made accountable for the value that they delivered to their owners.
The small number of owners all wanted value for money in the senior managers that they hired (principally the board members).
Now executive remuneration is largely set by remuneration committees for each company.
Each remuneration committee is mostly made up of executives of other companies.
Executive A will sit on the remuneration committee of company B.
Executive B will sit on the remuneration committee of company C.
Executive C will sit on the remuneration committee of company A.
etc. etc.
And they will all vote themselves huge pay awards.
Large proportions of a large number of companies are also owned by large investment funds, e.g. Calpers - the Californina State Pension Fund and large insurance companies that offer pensions.
The executives of the large insurance companies also sit on the remuneration committees of other companies and they certainly don't want their large pay awards questioned.
So they too vote for large payments, irrespective that it is directly against the interest of their investors.
The situation with the executives of large government (or union) pension funds is less clear cut. They also earn large amounts and don't want to see their pay cut as part of general pressure.
However they are also under strong pressure from the state and city governments, to deliver best returns.
Indeed just about the only criticism of outlandish pay awards to senior executives in the last few years has come from Calpers and not many have come from them.
The system that decides executive pay needs to be completely reformed.
It diverts company profits away from shareholders and into the pockets of board members.
Shareholders like pension and investment funds.
N.B2 There is a also a large correlation between large scale expansion of the money supply and increasing income inequality.
When there was little money printing (over and above GDP growth) there was low income inequality (e.g. 1950 to 1970).
Once the printing presses started whirring there was also increasing disparity in income between the rich and the poor - the situation since circa 1980.
http://4.bp.blogspot.com/-7VJ0V3c593s/UIbuq5ITZ3I/AAAAAAAAARo/-2kvNa8asv8/s400/Total+US+money+and+inflation.png