Income, as defined by the Merriam-Webster dictionary, refers to “a gain or recurrent benefit usually measured in money that derives from capital or labor.” But income is much more than the mere intake of money or assets; it is an active force, a marker of Anglo-Saxon male hegemony, a dividing force amongst the class-based hierarchy of America. Specifically, the inequality between social groups in the United States, measured by gains in both wealth and wages, is a factor of utmost importance in the understanding of economic stratification in American society. In our modern global economy, this high degree of imbalance can be viewed comparatively to other countries, while also analyzed in context of its effects on other nations’ workforces.
Income inequality in America is a complex and pervasive phenomenon. The United States ranks higher than any other G7 country in income inequality, with a Gini coefficient (a widely accepted measure of economic inequality) of 0.434 — indicating severe divides between the rich and the poor. Furthermore, the top 1% of income earners have slowly pulled away from the middle and lower classes, increasing their share of income by 226% between 1980 and 2015. Relatively, the unequal distribution of income in America largely occurs not due to any significant changes for low-income individuals, but the uptick in gains for top income earners.
Income inequality frameworks
But what factors contribute to the top 1%’s success? A framework known as skill-biased technological change theory is championed by economist Jeremy Greenwood, who contends that the rise in income inequality, especially for top earners, centers around the advent of new technology. Today’s rapid pace of innovation is accompanied by high costs in terms of learning, and skilled labourers are far more advantaged in these learning processes than their unskilled counterparts. Due to increasing technological advancements, the productivity of skilled labourers increases, resulting in a subsequent increase in their demand. As such, technology and education are juxtaposed, with increases in the former widening income inequality and increases in the latter decreasing earnings gaps.
Skill-biased technological change theory is countered by economist Thomas Piketty, who espouses a view more related to corporate practices. Piketty notes the disparities in wealth inequality levels among technologically developed countries, observing that mainland European countries such as Germany and France have far lower Gini coefficients than the United States despite similar technological advancements. As such, he presents a theory of his own, asserting that the relatively unique and unmechanized occupations of top earners, as well as their ability to earn wages set by their peers, create conditions of “meritocratic extremism,” or the justification of high incomes for the top percentiles of society based on work ethic and dedication. Since prevailing literature states that top earners are largely corporate executives, Piketty deems this class the “supermanagers.”
The supermanager class is an Anglo-Saxon phenomenon. While income inequality in continental Europe and Japan has persisted at relatively low levels since the late 1950s, disparities have steadily risen in the United States and Britain, especially since the 1980s with the rise of the conservative Reaganist and Thatcherist economic systems. Similar trends occur in Canada and Australia, who have largely experienced the fallout of these conservative regimes. Today, the top 1% of income earners in both of these countries is largely composed of corporate executives — managers, Board members, and CEOs.
The Dominance of the Supermanager
What factors allow supermanagers to remain dominant as a social class? Government policies in the United States remain primary contributors to the economic hierarchy. Modern American scholars argue that a weak progressive taxation system, coupled with lacking wealth taxes, allow top earners to maintain hefty incomes. Such scholars note the successes in America’s past; during World War II, a high progressive income tax system allowed Given these low taxes on the top percentiles, America’s welfare state is practically nonexistent, providing little socioeconomic support to the poorest margins of society in comparison to other wealthy nations. Furthermore, these levels of economic stratification are exacerbated by the declining inflation-adjusted value of the American minimum wage, which has remained at $7.25 per hour for the last 12 years. The failure of the American government to protect workers from predatory practices has encouraged the widespread proliferation of income inequality in recent years.
Pertinent to the discussion of supermanager dominance is the practice of offshoring, or basing company facilities overseas — thus taking advantage of lower costs of production. Given stringent regulatory legislation in the United States regarding sanitation, overtime, and child labour, many American companies have turned their gazes overseas with the intent of increasing capital gains. Along the US-Mexico border, maquiladoras serve as the workplaces of thousands of Mexican citizens, who expose themselves to toxic chemicals and accept rates as low as X per hour. Similarly, foreign direct investments in Vietnam have resulted in accusations of verbal and sexual abuse, and the predominantly female labour force is required to work 65 hours per week. The high ratio of supply to demand for domestic workers allows employers to host poor workplace conditions, which employees are willing to accept in fear of being fired. The increasing income earnings of top executives, coupled with the worsening plight of domestic wage-labourers, facilitate rising levels of income inequality — and the economic dominance of supermanagers.
Implications
Income inequality in the United States intersects class with two other prominent issues of marginalization — race and gender. The upper percentile groups in society are defined along racial lines; as of 2013, white households possessed a median wealth of $134,000, while that figure for Black households stood at only $11,000. Given the brutal enslavement of Black people throughout the earlier part of American history, Black families have lacked the wealth accumulation opportunities given to their white counterparts, and the effects of explicit and implicit discrimination alike have prevented them from accruing any significant number of assets. Even the recent anti-discrimination laws, and the leveling of racial income gaps that have taken hold on a pan-industry level, have failed to close the astronomical gaps between Black and white wealth.
Similarly, gender continues to be a field for economic stratification, and women have historically been underrepresented in upper-income jobs. Today, only 5.4% of Fortune 500 CEOs are women, and minimum wage workers are 62.8% female. The pandemic has continued to devastate women’s employment, allowing for heightened workplace layoffs of women and placing disproportionate amounts of women on the front lines in healthcare, social work, and community services. Despite the fact that straight married women benefit from the wealth of their husbands, women who are financially independent (or married to women or non-binary individuals) experience difficulty earning their share of wage compensation — a component of income that has a symbiotic relationship with gains in wealth.
The supermanager is generally white, Anglo-Saxon, and male. Income inequality is not just inequality of income; it is divisions along racial and gender lines. This degree of social stratification isolates the United States (and to some extent, its fellow Anglo-Saxon counterparts) as a country not divided solely on economic lines, but on race and gender as well. White, Anglo-Saxon, male supermanagers confer economic privilege by dominating the upper levels of the income ladder, asserting societal dominance in the context of the free market economy. As an audience to the varying fluctuations in wealth distribution on a global scale, we must remain cognizant of these demographic trends — and how they define who the haves and have-nots are in our modern society.
Furthermore, corporate supermanagers often act collectively to promote their own interests, forming alliances through which social and financial prowess is exerted. Economist G. William Domhoff notes the existence of a corporate community — which he defines as the community of top managers and CEOs who work together to advance their common interests. Rather than advancing their own personal agendas, members of this community exist politically as a coalition, combining resources to push forward collective goals. Through lobbying, offshoring, and campaign financing, the corporate community is able to successfully combat alliances of liberal and pro-labour organizers in order to achieve its goals. The existence of this community implies the dominance of corporate entities and their top employees in the political landscape of countries in which supermanagers are pervasive, and begs questions regarding the imagined versus actual political power of everyday citizens.
Solutions
The prevalence of the supermanager at the top of the American economic hierarchy begs some scholars to consider the implementation of higher taxes for upper-income earners. Given that many of these upper earners have the opportunity to set their own salaries, taxes might serve as the regulatory power to combat increasing income inequality. Researchers today confirm that as income taxes increase, the wages of high-income earners are less likely to be raised, indicating leveling of the economic playing field would occur if the American progressive income tax system were to be reformatted. Furthermore, higher taxes on the wealthy would allow the American government to develop a more robust welfare state, alleviating the plight of marginalized and poverty-stricken communities. Such welfare initiatives could include increased funding for schools in low-income areas, as well as support for state-subsidized food programs. Although opponents argue that higher tax rates result in lower levels of productivity, studies by the Economic Policy Institute have shown a low correlation between productivity and income to begin with; as those who would be most significantly impacted by tax increases on the wealthy are supermanagers who decide their own earnings, these salary amounts might fluctuate more freely than any productivity correlate would be able to determine. Piketty recommends a marginal tax rate at 80-90% for the top income bracket.
Progressive Americans today often make the case for corporate tax increases, especially in light of the outgoing Republican administration. A study by the Center for American Progress reveals that the corporate tax cut imposed by the Trump administration did not translate into raises for everyday Americans. Instead, business investment stayed relatively stagnant, and corporate revenue experienced an unprecedented level of decrease. As modern Americans advocate for practical economic policy, they should be reminded of the effects of this initiative, and perhaps turn their focus to lowering the incomes of the top percentiles through corporate taxation.
Given the ability of the corporate community to collaborate amongst itself, and make large soft money expenditures to indirectly support political candidates, the issue of income inequality is also connected to the policy realm of campaign finance reform. Following the controversial Citizens United v. FEC decision in 2010, which expanded the abilities of large donors to independently contribute to political campaigns, electoral contributions from high-income donors increased dramatically — giving corporate entities and executives a vast amount of influence over the electoral process. The rise of super PACs further skyrocketed the role of wealthy contributors, allowing soft money to flow through nonprofit organizations that fail to disclose their donors. Although the conservative Supreme Court majority would likely prevent any alteration to Citizens United, Americans should remain aware of the influence that a select few have over the electoral process.
To counter the gains made by top percentile supermanagers, scholars have argued in favor of welfare programs that benefit those at the bottom of the economic hierarchy. Contrary to many countries in mainland Europe, America lacks expansive social programs, reflecting indecision on the part of government leaders that have disproportionately impacted racial minorities. The United States has adopted an insurance-based rather than subsidized healthcare program, and even with Medicare, Medicaid, and the Affordable Care Act, countless Americans remain uninsured — severely jeopardizing their ability to seek medical care. Black and Brown people are far more likely than their white counterparts to lack healthcare coverage, implying the insurance system’s implicit racial bias. In addition, many of these scholars advocate increasing the minimum wage, which has been rapidly declining in inflation-adjusted value. While we must place limits on upper-income earners, providing communities in need with a robust financial safety net could be an instrument for social change.
Conclusion
Income inequality operates on the axes of both wages and wealth, and is a tangible indicator of stratification in American society. The phenomenon is characterized by the rise of the supermanager, a white, male top corporate executive amassing increasing sums of money over time. The supermanager profits on offshoring and setting his own salary, and existing in community with other members of his class. But the inequality perpetuated by the supermanager can be combatted by a plethora of policy situations: increasing individual and corporate taxes, implementing campaign finance reform, and investing in social welfare programs. As the United States welcomes the Biden administration, an administration that has implemented a vast series of social reforms, we as Americans must hold politicians accountable for answering to its common people rather than its top 1%.
Journal on World Affairs, UCLA 