by Ray Keating
April 24, 2019
Abigail Disney, a filmmaker and the grandniece of Walt Disney, is very upset about executive pay at the Walt Disney Company. She made this clear in a Washington Post op-ed. Unfortunately, she also made it clear that she understands nothing about economics and how earnings are determined.
Ms. Disney complained about “the naked indecency of chief executive Robert Iger’s pay.” Golly. She then went on to compare executive pay to the average worker’s, railed against tax cuts, and attacked the Disney company for opposing a minimum wage hike in the city of Anaheim. I hate to say it: This reads like a typical left-wing, Hollywood diatribe devoid of any economic sense, and the only reason that Ms. Disney is getting attention is because of her last name.
Now, let’s try to help Ms. Disney, and others, understand some basic economics when it comes to compensation. I do a regular podcast titled “Free Enterprise in Three Minutes,” and have dealt with the economics of earnings and wages in several episodes.
I’m currently doing a series on “What People Earn.” So, there’s three minutes (give or take) for each of the following:
Episode 31: What People Earn, Part I: Productivity explains that, ultimately, earnings, or incomes, are determined by productivity, that is, output per worker.
Episode 32: What People Earn, Part II: Boosting Productivity notes, “Higher earnings for workers are not about government mandating a minimum wage or a living wage. Instead, higher earnings are about increasing output, value or productivity in a competitive market.”
Episode 33: What People Earn, Part III: Why Does Mike Trout Earn More than Teachers? tackles the issue of someone like Angels outfielder Mike Trout earning more than your average school teacher – again, based on economics rather than how someone might feel.
And the latest episode deals directly with Ms. Disney’s complaint. It is titled Episode 34: What People Earn, Part IV: Why CEOs Make Far More Than Their Employees, and I explain the basics on why CEOs of businesses make so much more than those on the assembly line, covering the sales floor, or driving the trucks.
There are other episodes that Ms. Disney could benefit from in terms of understanding the actual economics at work, such as Episode 21: The Ills of Price Controls, which explains, in part, why a minimum wage hurts, rather than helps, young, inexperienced, low-skill workers, and Episode 15: Marx Was Wrong – Owners and Labor Work Together, which lays out how the real relationship between business owners and workers functions, as opposed to the idea that one is pitted against the other.
So, there you have it. Six quick lessons for Ms. Disney and others on the economics of earnings. That’s a total of about 18 minutes in listening time. Now, how many people who line up with Ms. Disney on such matters will carve out this little bit of time to gain a better grasp on economics and compensation? I’m guessing not many – and that is unfortunate.
Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels, with three books - Reagan Country: A Pastor Stephen Grant Novel, Heroes and Villains: A Pastor Stephen Grant Short Story and Shifting Sands: A Pastor Stephen Grant Short Story – published in 2018. In addition, the second edition of Warrior Monk: A Pastor Stephen Grant Novel was published in January 2019. He can be contacted at email@example.com.