Information Technology Reference
In-Depth Information
CEO
CEO
Worker
Worker
1980
2003
FIGURE 10.13
In 1980 the average pay for a CEO at a large American company was about 40
times the pay of a production worker. By 2003 the ratio had risen to about 400 to 1.
3.
English has become the de facto language of international business.
English is the native language in 12 countries, including the United States, which is
the dominant economic power on the planet. Another 56 countries teach English
in their schools. The dominance of English makes it easier for products to find a
worldwide market.
4.
Business norms have changed.
In the past large businesses promoted from within and would not recruit executives
from other firms. Today firms vigorously compete with each other for top executive
talent.
Frank and Cook argue that winner-take-all effects are bad for the economy for a variety
of reasons. First, winner-take-all markets increase the gap between the rich and the
poor. Between 1979 and 1989, the inflation-adjusted incomes of the top 1 percent of
US wage earners doubled, while the median income was flat and the average income of
the bottom 20 percent actually declined.
Winner-take-all effects draw some of the most talented people into socially unpro-
ductive work. The problem with winner-take-all contests is that they attract too many
contestants. For every comedian who hosts a late-night talk show, tens of thousands of
comedians struggle in nightclubs, hoping for their big break. The multimillion-dollar
incomes of a relatively few high-profile attorneys help attract many of the brightest col-
lege students toward law school. We end up with a glut of lawyers. Meanwhile, there is a
shortage of nurses and nuclear engineers.
Winner-take-all markets create wasteful investment and consumption. For exam-
ple, there is fierce competition among candidates for slots in the top business and law
schools. No one wants to go for an interview looking less than his or her best. For this
reason, male interviewees are reluctant to show up for an interview wearing a suit that
