Inequality in South America

A recent Economist article provided a lot of detail about inequality south of the Border.  Although income inequality in the United States has ballooned in the last 30 to 40 years it is even worse in Central and South America.

To me the inequality is caused by simple human nature.  Bosses control who gets paid how much, but bosses are competing with other companies.  So in a competitive market the most selfish and exploitive bosses are going to force everyone to bring wages down to their level to compete.

Conventional economics relies on the minimum wage to mitigate the damage.  That's like trying to do heart surgery with a meat cleaver.  Because raising minimum wages in one country disadvantages that countries industries competing against other countries it is very hard to get a minimum wage passed that is not minimal.  On top of that minimum wages generally apply across the board, so very small businesses where the owner makes little money won't be able to afford the higher wages so will lay people off and perhaps go out of business.

A better approach would be to focus on using tax policy to make companies more like teams and less like kingdoms.  Each companies median wage is the base and wages that deviate to much above the median would be taxed heavily.  So the way management makes more money is by bringing the median up, not by driving it down.