If you exist in an economy solely consisting of yourself and your employer, you went from receiving 1% if revenue to .2%. Your earnings are never absolute in terms of buying power or wealth - they are both relative, because the market behaves relatively to what people have or do not have. If your CEO gets 5 times richer than you, they now exert 5 times more economic influence on the economy and you in reciprocal exert 5 times less. R&D will cater less to you, industry will target you less, and most importantly your real spending power will go down.
How? Because your economy just went from 10.1 million to 100.2 million. That is a 10 times inflation of the monetary base, which in aggregate would see a correspondingly (smaller) influence on the price of goods and services. Your buying power will drop.
That extends to whole economies. If you are a part of a contiguous segment of the economy whose total wealth or revenue is declining, your influence, buying power, and real prosperity is also declining, regardless of absolute income.
It is also worth mentioning that wealth is a much greater influence on prosperity than income. He who owns the means of production is he who reaps the spoils of growth first, and can decide what to do with them. That is trickle down in a nutshell, but it is at complete discretion of the capitalist running the show how the money they get is then spent, and nowadays it is definitely not going to be on you.
> That is trickle down in a nutshell, but it is at complete discretion of the capitalist running the show how the money they get is then spent, and nowadays it is definitely not going to be on you.
So wait, you're saying the capitalist can choose to pay people zero dollars for their salaries or charge 100 times more for their goods and workers/consumers will automatically accept those terms? Because that's not really how it works.
You are giving exaggerated examples, but in practice the capital owner can, if they want, do the long form negotiations with people to lower wages (to the minimum) and raise prices because they have significantly more bargaining power when they control so much of the wealth pie.
Respectively:
If I run a business and I want to stifle wages at my company, I both stop raises and then start cutting gradually. People will leave, I will hire new workers (we have a labor glut after all, if you expand your reach enough you will find more and more desperate people for money) and repeat the cycle until we hit the wage floor.
No, it is probably not $0. There is some point for even the most desperate and hungry person where you say it is not worth my time to make, say, $2 an hour rather than just trying to find another job. It is not about not giving the worker anything in return, it is about finding the least they are willing to take for the work.
But it is not a fair negotiation. When you are talking about almost every employee, they are bargaining from the perspective of having no time (in a business sense) to barter, and their ability to eat or sleep depends on the job. For the owner, their ability to expand their own wealth depends on the employee, and they can wait as long as they want for the hiree to forfeit to their terms.
Likewise with goods prices, if you are in perpetual profit you can constantly amass more money, and in the US economy wealth amassment enables you to take several measures to raise prices in the long term without losing customers to competition - you buy your competitors out, you bribe politicians to pass legislation that reduces competition or the ability to startup in your industry (through expansive regulations, permit requirements, red tape, and sometimes even outright banning competition as is the case with teleco) and you use the market leverage you get to make more profit.
I imagine today companies like Comcast in some areas are charging 100 times more than real market valuation of a cable internet subscription would be in an environment of absolute market freedom.
If you exist in an economy solely consisting of yourself and your employer, you went from receiving 1% if revenue to .2%. Your earnings are never absolute in terms of buying power or wealth - they are both relative, because the market behaves relatively to what people have or do not have. If your CEO gets 5 times richer than you, they now exert 5 times more economic influence on the economy and you in reciprocal exert 5 times less. R&D will cater less to you, industry will target you less, and most importantly your real spending power will go down.
How? Because your economy just went from 10.1 million to 100.2 million. That is a 10 times inflation of the monetary base, which in aggregate would see a correspondingly (smaller) influence on the price of goods and services. Your buying power will drop.
That extends to whole economies. If you are a part of a contiguous segment of the economy whose total wealth or revenue is declining, your influence, buying power, and real prosperity is also declining, regardless of absolute income.
It is also worth mentioning that wealth is a much greater influence on prosperity than income. He who owns the means of production is he who reaps the spoils of growth first, and can decide what to do with them. That is trickle down in a nutshell, but it is at complete discretion of the capitalist running the show how the money they get is then spent, and nowadays it is definitely not going to be on you.