The global scale of modern and digital businesses and their therefrom resulting efficiency is producing a fault line in the economy. From a classical economists perspective, this fault line shouldn’t exist. Every employee gets paid according to their value (productivity) and market forces distribute labor accordingly.

Here are two examples that show that in a global digitized world, this falls apart:

1. Is a developer at Meta more productive, because every change they make reaches hundreds of millions of people compared to a developer at a small company only serving a local market? Should only global companies be able to hire the best talents and smaller companies, which includes banks that are mostly focused on national markets, shouldn’t? This raises the question whether only international companies should be able to hire the best employees.
2. Some products inherently offer economies of scale. That means that a Meta developer’s productivity grows with each user that Facebook or Instagram gains. When it comes to a waiter in a restaurant, the opposite is the case. The better the service, the fewer clients they can serve. But even with efficiency gains, a waiter is only ever going to be able to serve a limited number of clients. As a result, there are 2 types of employees emerging: Type 1: Employees whose productivity grows even if they don’t contribute at all (because their user base grows), and Type 2: Employees whose productivity is limited, no matter how good they are. According to conservative economics, their salaries will behave accordingly creating a rich and a poor class. However, both types still compete on the market place for all goods, from food to sporting equipment, vacation homes, and cars.

This comes on top of other market distorting factors, such as public services, in which market failure is prevalent and competitive salaries cannot be paid for many reasons.

Many of the current business models are based on this inequality. Delivery drivers are another example. For these businesses to operate, it takes one client class, which has enough money to easily pay for delivery riders while the delivery riders themselves have to live on minimum wage (and sometimes even less) and be far removed from ever being able to use their own service.

This leads us to a couple of very important conclusions:

1. Salaries are not related to an employee’s value, which is more determined by the size of the company and user/client base.
2. Unless we accept 2 classes that are economically very far apart from each other, this division isn’t sustainable. There is just no economic model in which we can unite the ever growing salaries of employees at global companies with the limited salaries of the “working class”. Such inequality has rarely ever ended well in history.

An example of this is that around 100 years ago, people ate food that was prepared outside of their home, because the cheapest meal was not one that was made at home, but at a pub/restaurant/public kitchen. It is only in the past 50 years that (especially in the West) eating out has become somewhat of a luxury. Few wait staff can probably afford to eat at their employer’s restaurant regularly unless they get discounts. Unless something changes, this will only get worse.

The world needs to find a solution for this “productivity gap”, which is a gap not based on personal capabilities, but purely based on employees’ environment and product.

AI and automation have the potential to help, making even the “limited” workers more productive (or eliminating them putting them into more productive jobs). A delivery rider could potentially supervise 10 delivery robots. A waiter could focus on social interactions while an AI takes the order.

The question is how these efficiency gains will be distributed. If they are being distributed in form of higher salaries for the people now being more productive, there is hope. If the capital owners take all the gains, the situation will turn catastrophic. Every capitalist supporting the latter option should read their history books to see what happens when the lower classes remain suppressed and suffering for too long.

Alternative solutions are not very popular (yet). Unconditional Basic incomes, higher taxes, targeted subsidies could help out as long as societies agree that an unequal world is not a good one. But for as long as everyone in power just tries to win and justify their gain with skill, we are heading for a dark place…