Life, Liberty, and the Pursuit of Equity
Employers and employees receives wages. In addition to wages, the employer takes risks and builds equity.
An employer builds equity because of the risk he takes to grow a crop, produce a product or sell an item.
An employee receives wages in exchange for his time, energy and talent invested in manufacturing, farm production, or sale of goods.
The difference between the owner and the employee is not simply the amount of income but more so the factor of equity. Equity rises with inflation and economic growth. Those with no equity (employees) receive increased wages with inflation but the cost of goods and services rise prior to an increase in wages.
Wages in the United States have increased about ten times over the last thirty years. The cost of goods and services have increased a similar ten times (1000%). A 20¢ loaf of bread is $2.00 and a $2,000 automobile is $20,000. A $20,000 house is $200,000. Thus, the worker without equity spends the same portion of his earnings for products and services as thirty years ago..
The owner (equity holder) has likewise had a salary increase of ten times (1000%) and his cost of living has increased ten times. As wage earners, the owner and the worker are similar.
The real distinction is in equity growth:
- The farmer’s one hundred acres has increased in value ten times from $500/acre to $5,000/acre. His equity has grown from $50,000 to $500,000.
- The manufacturer and store owner have likewise experienced increased equity.
Equity is similar to a rising tide: all boats rise with the tide (inflation). The worker-consumer pays for a ticket or cargo but does not share in the value of the boat.
Each of us has a dream of ownership and the building of equity.
If you have an risk-experience of success or failure that you want to share, we welcome your input!