Income gaps

Income inequality has been increasing over the past 40 years and much of it is due to math. If Joe makes $100,000 per year and Jim makes $30,000 the difference is $70,000. If they both get a 10% raise Joe now earns $110,000 and Jim earns $33,000 and the gap is $77,000. Some companies in an attempt to minimize this have given pay increases in two steps. First they offer a set amount to each employee and then a percentage increase. In the example say the company offered $2,000 in cash plus 5% across the board. In that case Joe would get a $7,000 raise and Jim would get $3,650. Joe's new salary would be $107,000 and Jim would get $36,650 and the gap would be $70,350. The more common way to slow the gap is to use the progressive income tax. If Joe's increase was taxed at 70% and Jim's was tax free they would both get a $3,000 net increase in pay. This doesn't make the poor richer but it does make the rich poorer. If you transfer the tax collected from Joe and gave it to Jim the poor would get richer as Jim's income would increase from $30,000 to $37,000. While this has not been done directly with salaries, it has been done by offering many benefits to the poor that are denied to the rich.