Income inequality: Blame your mediocre company


The reason you make less than your brother-in-law isn’t because he’s a CEO and you’re only an executive VP. It’s because he works for a great company, and your company is just okay.

That’s one conclusion you can draw from a new research study, titled “Firming up Inequality,” published this week by the National Bureau of Economic Research.

The authors of the study—two professors from Stanford, one from the University of Minnesota, and an economist at the Social Security Administration—describe it more dryly. They say income inequality is rising because of a growing disparity between what different companies pay their workers, not a difference in what individual companies pay. It’s a problem of inter-company, not intra-company pay. Put another way, income inequality is not rising because the average worker at a company makes a lot less than her boss but instead because the gap between what bosses, and workers…

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