Put this into perspective. In 1970 a man earning $35,000 a year could afford to own a home, a car, and afford to have his wife stay at home to raise the kids. If the wife worked too then they probably had a second summer cabin somewhere.
in 2010 a man earning $35,000 is barely living above the poverty line.(depending on location) you can't support a wife to raise the kids, let alone anything else.
The average worker in the USA in 1970 earned $19.20 In 2010 the average worker earned $19.70
In 1970 the average CEO earned $500,000 in 2010 the average CEO earned $5,000,000
Now tell me what is wrong with that picture? Circuit city is my favorite example. in 2008 after a year of bad sales the CEO of circuit city came up with a plan to save $10 million over 3 years. He fired the top 3,000 highest paid non mangers and rehired new people in their place earning minimum wage. Wall street was happy, and he and the board paid themselves $5 million in bonuses immediately.
With in a year Circuit city was gone completely. why? because he fired the top 3000 sales people. He could have saved $10 million dollars immediately that year by cutting his and the rest of the executive boards salaries. They weren't doing anything anyways.
executive and upper level bonuses have gone out of control. Goldman Sachs had to borrow money from he US Government so it could pay bonuses. I always thought that if the company did poorly bonuses were to be cut first not last, but for the rich they payout bonuses and then close the company down.
While this is exaggerated quite a bit it does still have one major point that I see. The people at the bottom that spend all their income and save very little because they can't afford to are being squeezed whereas the people at the top who don't spend all of their income get to save even more. While saving money is good in general this is not true for an economy based on consumption as someone at the bottom will spend the money so another person/company will benefit.
The wealthy take the extra money and while some spend it on lavish things such as houses, cars, Yachts, many invest it and this is the big change that has happened since the 70s, the internet has made it where a wealthy person does not need to pay huge fees anymore for investing in the market. In the past some fees were as high as 15% for investing large amounts of money in the market but in today’s internet they tend to have a fixed low cost. This has made the one fee the wealthy paid (and kept low earners out of the market) disappear. So you have rising incomes at the top with less expenses for investing not to mention less taxes on those investments.
Last point I'll make is that I don't see an issue with high CEO pay but the market has forced CEOs to look at short term gains (month to month) instead of long term gains 5-10 years down the road and this has caused the issues we are seeing today when someone has no real interest in the long term growth of a company but instead focuses on short term gains it can cause a person to do really well at first but implode over the long run.