Expanding Income Disparity: six strategies for corporations to lessen the divide
The modern U.S. economic landscape relies heavily on the lavish spending of the wealthiest, as reported by The Wall Street Journal. The top 10% earners now account for half of all spending, while working-class and middle-class households see minimal increases in expenditures. This growing divide in spending patterns underscores the rise of income inequality. While tackling this complex issue is no easy feat, business leaders can take steps to make a difference.
Business can significantly impact income inequality in its earliest stages: how income is distributed within organizations. During what social scientists call the predistribution phase, a company's choice of salaries and wages significantly influences income equality. Additionally, business can take action against inequality of opportunity, having an influential role in shaping job prospects based on individual merit and potential.
Here are six ways businesses can help mitigate inequality:
- Clearly Define Your Purpose
Ask your company why it exists. Is it just to create profit, or is it to provide solutions that positively impact people and the environment? By prioritizing positive impact, profit becomes a byproduct, rather than the end goal.
- Secure Your Purpose
Once your company's purpose is established, commit to it in the long term. Tony's Chocolonely adopted a legal structure called Mission Lock to protect its dedication to paying above the living wage and maintaining ethical supply chains.
- Revamp Your Metrics
Adopt a new way of measuring profit that considers the true cost of business, including the impact on employees' wages and the environment.
- Close the Pay Gap
Implement fair compensation practices to ensure wage disparities are minimal, especially for underrepresented groups. Offer transparent salaries, avoid negotiation, and distribute bonuses equally.
- Promote Opportunities
Invest in education and training to help employees develop new skills and achieve better-paying jobs. Recognize the link between income inequality and education levels, and support employees in staying updated with technological advancements.
- Work in Partnership
Collaborate with others to amplify efforts against inequality. Whether it's partnering with NGOs, government agencies, or other like-minded businesses, collective action will have a greater impact.
Business leaders hold immense power in tackling income inequality. While these suggestions may not solve the issue entirely, they can make a significant difference in the world of work and beyond. By adopting these strategies, companies can move towards a more equitable world.
Sources:[1] Business & Inequality: Purpose-driven Strategies to Create a More Equitable World. IESE Business School Insight (2018).[2] The CEO's Guide to Purpose and Profit. PwC (2019).[3] Financial Inclusion in a Digital Age: Opportunities and Challenges for Businesses. Mastercard Center for Inclusive Growth (2017).
- Recognizing the purpose of their company as more than just creating profit, businesses can help alleviate the issue of income inequality by prioritizing positive impacts on people and the environment.
- To ensure a long-term commitment to this purpose, some companies, like Tony's Chocolonely, opt for legal structures that lock in their dedication to issues like fair wages and ethical business practices.
- To close the gender pay gap and promote equality of opportunity, companies can implement fair compensation practices and offer transparent salaries, avoiding negotiations and distributing bonuses equally.
- As income inequality is often linked to education levels, businesses can invest in employee education and training to help individuals acquire new skills and secure better-paying jobs, staying updated with technological advancements.
