The superstars theory explains how being the best, even slightly, triggers huge economic advantages. During chapter 5, we saw the superstars theory is a way to measure inequality: the more the share of total income in the economy going to these individuals, the more “unequal” the economy is.
During the last years, the increase on the gap between “superstars” and “normal people” has increased considerably in almost all the industries of our economy. For example, in 1982, the top 1 percent of pop stars, in terms of pay, got 26% of concert ticket revenue. In 2003, this figure increased to 56%. In sports we can see the same trend: according to the NY Times, in 2009 Cristiano Ronaldo made about 15 times as much as Pelé did in 1960, even after adjusting for inflation. Also during that year, the top 20 football teams got revenues for 3.9 billion euros, more than 25 percent of the combined revenue of the rest of the teams in Europe.
This trends remain true in the rest of industries and business around the world. Between 1994 and 2013, the share of GDP generated by Fortune 100 companies in America rose from 33% to 46%. Even when looking at individuals (and not companies/industries as a whole), the increase in inequality seems disturbing. According to a study from te Economy Police Institute, CEO compensation has risen by around 800 to 900% (depending on how it is measured) from 1978 to 2016. As we can see in the attached image, the CEO-to-worker pay ratio has shifted from 18.4 times in 1965, to 87.3 in 1994 and to almost 271 times in 2016.
Even when comparing CEO wages to those employees on the top 0.1% of wages, the superstar effect seems important: the average ratio between 1947-79 was 3.2 times and it is now at around 5.3 times.
Of course the dynamics of the entertainment industry (specially in the cases of music and sports) and the technological progress have a role in the evolution of this trends. However, it’s undenaible that the superstar effect has had an important effect on the inequality of many economies and industries.
Do you believe this is fair? Even if the inequality has increased, Is the remaining 99% better today than decades ago? Will this trends keep its path in the years to come?
I’m very interested to know what are your opinions on this matter.
NY Times: “How Superstars’ Pay Stifles Everyone Else” (December, 2010) https://www.nytimes.com/2010/12/26/business/26excerpt.html
Economic Policy Institute: “CEO pay remains high relative to the pay of typical workers and high-age earners” (July, 2017) https://www.epi.org/publication/ceo-pay-remains-high-relative-to-the-pay-of-typical-workers-and-high-wage-earners/
The Economist: “The Rise of the Superstars” (Sept, 2016) https://www.economist.com/news/special-report/21707048-small-group-giant-companiessome-old-some-neware-once-again-dominating-global