Say you have ten plots of farmland and a single farmer per each, but there’s one shed with shared tools, and one distributor for all of them and so forth. There’s one manager who doesn’t farm, he simply sees to it that good farmers are hired, bad ones fired, makes sure the ones there are, are working, that no one is hording the tools, and that trucks and orders are lined up exactly with production scale and times, etc.
Overall, a good manager can cause every item of produce to make it to the market at the lowest possible price. A poor manager can run the whole area into the ground so that the company goes bankrupt. So it could be said that the results of the company, in this organization, is at least half due to the manager. If the total revenue of the company, per year, is $500,000, then my manager should be making half ($250k) and the individual farmers $25k each (assuming that there are no other expenses nor intent to expand the company.)
Obviously, the leap from $25k to $250k is a rather large one. It means that one man has ten times the market power as any other ten men. Many people seem to think that this is a bad thing for there to be an exponential increase in market power as one climbs the corporate hierarchy. True, even more people (hopefully) feel that it is even worse if there is no income increase as one climbs the corporate ladder (aka true Socialism).
The exponential model of income growth follows basic logic, and really so long as one can move freely on the corporate ladder based entirely on merit, it doesn’t make a lot of sense to decry the income gap as any sort of issue at all. As it is now, ones wage is essentially a compromise based on person A’s view of his personal value and the position, and corporation B’s own view on those questions. I.e. public, popular opinion is what decides the value of a job and of a person. It is, via the bidding market, a democratic process.
But it should be remembered that modern economics started as a branch of philosophy. The idea was to present a method whereby granting personal freedom, in end result, would push the individual into working to better the world for himself and his fellow man through no other prompting than personal gain. Again, the goal is to improve the lot of humanity, not to be fair nor to be democratic nor personally free. So the argument can be made that tampering with the market is allowed so long as it is an improvement on the system (where improvement equates to improving the overall lot of humanity at a greater rate.)
For instance, I can think of two possible advantages to a flatter income increase as rank grows:
More people receiving higher education. The process by which Capitalism works is, at heart, to make people want to innovate and so improve the productivity of mankind so that the value of everything is reduced and services enter the buying realm of more people. But, for this to happen, you need find people who have the personality and education to innovate and give them the resources they need to do it. Giving the best education to those who haven’t the personality is a waste of resources, and not giving the education to those with the personality shrinks the hiring pool. Since personality is, to some extent, independent of ones upbringing, not giving everyone a chance at higher education is going to shrink the hiring pool unnecessarily.
The newest, most innovative products, are only affordable to the most wealthy. By flattening the income ladder, there may be a greater market for these products, thus giving a higher incentive to companies to invest in R&D.
I can think of counter arguments to either of these:
Ensuring a bright future for your children is one of the greater motives for wealth accumulation, so removing or lessening the need to afford a good education for the young could lead to a net loss. Also, personal productivity is to some extent trained by ones parents, so it is likely that there is a higher proportion of people with the correct personality among the minority class of the children of the wealthy so it maybe serendipitous to focus more attention there anyways.
The wealthy usually use their money to invest in new companies, which is also analogous to R&D to a significant extent. Also, the newest and bestest technologies might only be affordable if there’s a super rich minority so robbing that realm of populace might actually have the reverse result.
On the topic of education, it looks to me from comparing various nations like it’s likely that higher education for more has an overall net benefit to innovation, so debate aside, that seems to be the side on which the numbers fall. I’m more interested in topic #2 so far as this debate is concerned, though if anyone has any other thoughts of further possible areas of advantage/disadvantage, I’d like to see them.