Furthermore, the wider gap between the CEOs and other average workers has led to a decline in an organization’s productivity. The wider gap creates inequality in organizations. As a result, it will be challenging to integrate the skills possessed by the average workers and the CEOs (Mueller et al., 2017). An organization comprises of people with different skills, therefore, for an organization to be optimally productive, skills among all employees and those of the CEOs must be integrated. However, due to the dramatic inequality, it becomes difficult to integrate the skills. In many cases, operations go on with little input from the CEO’s skills. As a result, the CEO’s skills become less important to the organization bearing in mind the high pay is supposed to cater for the exceptional skills that attracted the organization to the CEO. Ultimately, the inadequate integration of skills leads to low-quality products and services which reduce productivity as well as profitability (Mueller et al., 2017). Similarly, high pay inequality leads to a limited supply of skills when there is an increasing demand for skills, while when the demand for skills increases, the supply of skills becomes limited.
In conclusion, the gap between the CEO’s pay and that average employee has been widening in recent decades. The widened gap between the pay between average employees and CEOs has created an inequality that has had adverse effects on the organization. For instance, pay inequality leads to poor coordination of skills within an organization. This is because other skills are so premium to the extent that they outsize others. As a result, poor integration of skills becomes a problem leading to the performance of organizations. Besides, inequality leads to a skill supply-demand crisis. This is because; there are often limited skills when the demand for it is high and vice versa.
References
Mueller, H. M., Ouimet, P. P., & Simintzi, E. (2017). Wage inequality and firm growth. American Economic Review, 107(5), 379-83.