January 04, 2009

What promotes economic growth better: Small or large differences in salaries?

I’m born and have grown up in Denmark. That is probably one of the important reasons why I tend to be in favour of companies where the difference between what the highest paid person in a company is paid and what the lowest paid person in the same company is paid is relatively modest.

In, for example, the United States of America, I now and then read about companies where the difference between what the highest paid person in a company is paid and what the lowest paid person in the same company is paid is very large, for example a difference in excess of factor 1:50. In this regard, I stumpled upon this interesting posting of December 17th, 2008 from Mr. Paul Krugman to which - up until now - more than 350 comments have been written.

What do you think promotes economic growth better: Companies where the differences between the highest and the lowest salaries are very large, let’s say above factor 1:50, or companies where the differences between the highest and the lowest salaries are relatively modest? Please explain why.
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