July 18, 2010
A very interesting study was performed by researchers from Harvard, Utah and Rice universities. The resulting paper was presented at the 23rd annual International Association of Conflict Management Conference at Boston, Massachusetts in June 2010. In essence, it revealed a distinct and very ugly difference in relationships between executives and ordinary workers as income disparity widens.
The study paper is entitled “When Executives Rake in Millions: Meanness in Organizations”. From the study abstract:
“We examine a heretofore ignored consequence of rising executive compensation. Specifically, we claim that higher income inequality between executives and ordinary workers results in executives perceiving themselves as being all-powerful and this perception of power leads them to maltreat rank and file workers. We present findings from two studies—an archival study and a laboratory experiment—that show that increasing executive compensation results in executives behaving meanly toward those lower down the hierarchy.”
In other words, when there is a great disparity in wages, executives see themselves as so important and superior they think it’s OK to be mean to their employees. For a mental analogy, picture the days of old when countries were ruled by kings. Then recall what you’ve read in history books about how they treated their “subjects”; in many cases, going so far as to have them beheaded just to be mean. Today’s executive mentality is certainly no different. The only thing that keeps them from beheadings is, first and foremost, their need of “subjects” in order to get their millions; and second — well, it’s against the law — at least for now. But it doesn’t keep them from firing workers just to be mean (see the following inequity graph).
To the Old Man, who has literally been around the world a few times, the findings are not surprising, as I saw this first hand on so many occasions. More so during the last 20 years before retirement.
According to the study, and well documented by hundreds of other sources, CEO’s compensation has grown by 300 percent over the past 10 years. For comparison, a worker earning $50,000 ten years ago would be making $500,000 today if treated the same. However, according to the U.S. Census Bureau, workers pay actually decreased from 2000 to 2007 by $324 (see two graphs below). Other reports show minor increases during the last decade, but by no more than about 7 percent. A far cry from 300 percent.
The Old Man can’t help but think back to the beginnings of the Yuppie generation in the early to mid 1980’s. In his eyes, what we are witnessing today is the “maturing” of that generation. I personally experienced those early years of the Yuppie, and there is no question that what this study reveals is their apex. So while none of this is surprising, what is surprising is how calmly the American worker has accepted it all.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky