Wealth inequality in developed nations has surged, with stagnant worker wages contrasting sharply against skyrocketing CEO pay. Inflation erodes real wages, while CEO-to-worker pay ratios jumped from 21:1 in 1965 to 290:1 in 2023.
One must just look at the recent decision to award Tesla boss Elon Musk (already the world’s second riches person) a cool $1 trillion (about $3,100 per person in the US) bonus for his efforts, while tech companies around the world increase their coffers through layoffs and the increased use of automation and AI.
This increasingly obvious wage gap stifles economic growth, fuels instability, and traps workers in a no-win situation, reducing home ownership possibilities and loading them down with increasing amounts of credit card debt. This is the stuff revolutions are made of.
Stagnant Wages, Rising Costs
Nominal wages in the US and Europe grew 2-3% annually since 2000, but inflation often outpaced them (8% in Sweden in the last two years alone, while the average wage increase was around 3%). In the US real wages dropped 0.7% since 2021.
Rising costs result in:
- $1.21 trillion (about $3,700 per person in the US) in US credit card debt (2025).
- Unaffordable housing for younger generations.
- Shrinking retirement savings.
CEO Pay Surge
CEO compensation at large US firms, driven by stock options and bonuses, far exceeds inflation and profits, widening inequality and fostering distrust as workers see stagnant pay despite corporate gains.
Economic Consequences
- Reduced Demand: Stagnant wages limit consumer spending, slowing growth.
- Productivity-Wage Gap: Tech boosts output, but wages lag.
- Social Instability: Wealth concentration increases unrest and polarization.
- Corporate Short-Termism: CEO incentives favor buybacks over long-term investment.
Policy Solutions
- Tax Extreme Pay Ratios
- Mandate CEO-to-worker pay ratio disclosures; impose progressive taxes on firms with ratios above 100:1. Offer tax credits for wage growth and employee retention.
- Strengthen Labor Protections
- Reverse union decline since the 1980s with stronger organizing rights and anti-retaliation laws. Index minimum wages to inflation to ensure real purchasing power.
- Subsidize Four-Day Workweek Programs
Fund national pilots for four-day workweeks without pay cuts, as trials show stable productivity and reduced turnover. Subsidies incentivize adoption, boosting wages through time and reducing unemployment.
How to address this?
Wealth inequality, driven by stagnant wages and soaring CEO pay, undermines economic stability and fairness. Government policies—taxing extreme pay gaps, bolstering labor rights, and piloting shorter workweeks—can redistribute prosperity, strengthen demand, and build resilient economies. Taking a second look at universal basic income for the casualties of AI and automation will also need to be factored into this growing and concerning equation. Addressing inequality is critical for sustainable growth.
Conservatives will argue that this is socialism by the back door. But tell me this in two or three years when automation is replacing most white-collar and blue-collar jobs.