Fighting Inequality

Wealth inequality is likely to be written about as a defining theme of our era, but how business leaders react to it will go a long way toward shaping how history remembers it.

by Frank Kalman

T

ime will tell how history will define our current era of business, but if there’s anything of certainty we can expect future historians to write, it will be that rising global inequality among developed nations will be a defining story of our time.

Indeed, as French economist Thomas Piketty famously outlined in his 2014 tome “Capital in the Twenty-First Century,” we’re at a point in time where the concentration of wealth is so profound that it threatens the very fabric of democratic society. Perhaps nowhere has this been more prevalent than in the United States, where inequality, both in terms of wealth and social, quickly emerged among the defining themes of the country’s 2016 presidential election.

That event ultimately propelled, ironically, a billionaire, Donald Trump, into the White House on the heels of support from voters who felt that economic opportunity had long passed them by thanks to globalization and technology — two forces, Piketty argues, that have contributed to global wealth inequality in the first place.

But as our cover story in this issue shows, inequality has proven to take on many forms. And its influence over some of the basic tenets of our society — namely education, executive pay and technology — appears likely to have a major influence over the flow of talent in the labor market.

Consider education in the U.S., one of the issues our story examines. Rising tuition costs at institutions of higher education have made it more difficult for low-income individuals to access the upward mobility such a degree provides. Meanwhile, those who are able to finance their education through student debt are finding the burden of repaying those loans is often more difficult than they could have imagined because the skills they learned aren’t matching up to well-paying careers. This problem is in addition to the other woes affecting school systems at lower rungs on the ladder, where school districts in low-income neighborhoods with primarily minority students struggle to attract the best teachers, who far prefer to teach in plush districts with ample resources and funding.

Then there’s rising executive pay, the second issue our story covers. A half century ago, executives feared being paid too much would hurt employee morale; now, with more power in how their pay is set, executives at some of the U.S.’s largest companies are earning compensation nearly 300 times that of the average worker. What’s more, as our cover story shows, this isn’t because CEOs have grown more skilled or talented. In fact, one could argue that as automation and technology take over more and more rote executive tasks, CEOs today may be doing less work than those in the past.

That leaves us with the section’s final issue, technology. Just as the booming technology sector has played its part in creating the gap between the lowest and highest earners in U.S. society, it is likely to become one of the most important tools in helping close the gap for future generations. The continued rise of internet connectivity and advancements in communication platforms mean more learning can be distributed online to mass audiences at lower costs, in theory discounting the need for in-person education at expensive colleges or universities. What’s more, while automation and the continued development of artificial intelligence technology is likely to displace many jobs, it will also create new ones, improving worker efficiency and creating new economic opportunity.

The challenge for business leaders will be in how active they are in addressing these forces of inequality, and how well they react to them as they continue to influence their businesses. Taking a pay cut may be their first order of business. Being active in addressing these larger problems related to inequality should come next.