Most people cannot lift a 500 pound weight off the ground by themselves. But, by using a simple lever with a long bar and a fulcrum, they can use a small amount of force with leverage to lift a heavy weight.
I have written a number of posts on the American Dream – and why many seem to feel it is slipping out of their grasp including:
Is it possible to leverage the American Dream? Yes, it is, and inventors uniquely have more ways to leverage success than do most typical workers. More about this in Part 2 of this post.
A typical worker uses his or her knowledge and skills to the benefit of their employer who pays them a wage based upon the the worker’s perceived market value.
Hourly workers are compensated directly based upon the number of hours worked. Salaried workers (typically higher paid professionals) have an annual salary and are paid the percentage of their salary that comprises each pay period – typically every two weeks.
The American Dream problem for both classes of workers is they have limited ability to leverage their work for significantly more income.
The hourly worker may indeed work more hours, but they cannot work 24 hours per day and the employer must agree to the additional work – assuming they have a need. The salaried worker may negotiate a higher salary, but unless their perceived market value greatly increases, any salary increase is likely to be modest.
The hourly worker is constrained by time – the number of hours they can work. The salaried worker is constrained by perceived market value of their skills and talents. Their employer is constrained by the competitive forces within the global economy: if their labor costs are too high, they cannot compete profitably and will be out of business.
Those at the upper echelons of income have much more leverage than do lower-income and middle-income workers.
Virtually all upper income workers are salaried – with the ability to multiply or increase significantly their perceived market value.
An NFL Football player who has a great season will certainly be able to command a much higher salary upon contract renewal. A talented attorney, who wins many cases, will be able to increase her rate considerably over time based again on perceived market value.
Put succinctly, lower and middle-income workers see their options for the American Dream slipping away: they can neither increase their work hours, nor their perceived market value – they simply have no leverage in the marketplace.
There is a solution for these workers. They must modify their circumstances so that they can begin to leverage their skills for much greater income.
More about this in Part 2.