What caused the income inequality gap that started in the 70's?

It's far from that simple. Pay equity is probably the biggest reason. In 1960, the average chief executive earned 40 times as much as the average worker. By 1990, the average CEO earned 107 times as much. In the following decade, this ratio rose to 525:1 before settling back to 301:1. Various sources give slightly different ratios, but all are in general agreement that the ratio of executive compensation to the pay of ordinary workers has grown dramatically over the past four decades.

Prove it. There is no direct correlation between stock market investment and job creation. Here is what Forbes said about it.

“Both on average and for all but seven years between 1977 and 2005, existing firms are net job destroyers,” write Wiens and Jackson, “losing 1 million jobs net combined per year. By contrast, in their first year, new firms add an average of 3 million jobs.”

“New businesses account for nearly all net new job creation and almost 20 percent of gross job creation, whereas small businesses do not have a significant impact on job growth when age is accounted for.”
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Investment in established publicly-owned companies doesn't create new jobs. Why is net investment at a measly 4 per cent of output when pre-tax corporate profits are now at record highs – more than 12 per cent of GDP?

"In standard economic theory, this makes no sense. When profits go up, companies should be seizing investment opportunities to lay the groundwork for even more profits in future. In turn, that investment should create jobs, generate more capital goods and lead to higher wages. That’s how capitalism is meant to work.​

“From 2004 to 2013, 454 companies in the S&P 500 Index expended 51 percent of their profits, or $3.4 trillion, on repurchases, on top of 35 percent of profits on dividends… More than three-quarters of compensation for the 500 highest-paid executives came from stock options and stock awards.”

“So who gains from open-market repurchases? Their sole purpose is to give a company’s stock price a manipulative boost, and prime beneficiaries are the corporate executives who decide to do them… For corporate executives, stock-based pay is a ticket to membership in the 0.1 percent top-income club. So why do we let executives manipulate the stock market?”​

New, mostly privately-owned companies are the job creators. So if the Fed’s money doesn’t go into job creation or investment, where does it all go? One part of the answer is that the firms are just sitting on the money, often parked overseas. Another part of the answer is given by William Lazonick in the New York Times: an astonishing amount goes to share buybacks.

How CEOs Became Takers, Not Makers

 

Executive compensation is not market driven in the way that most jobs are. Stockholders owners don't get to vote on executive compensation. The fox is in charge of the henhouse. The CEO's cherrypick boards composed of executives from other corporations who vote each other exorbitant salaries, obscene stock options, and golden parachutes. it gives them no vested interest in long term company success or making the owners or workforce happy. Their best bet is to come in, get the best deal possible for themselves by maximizing short-term profits and then hit the golden parachute when the bad news comes in.

 

I have never suggested capping executive pay. I'm suggesting that the disparity between executive pay and worker pay is a problem. I'm suggesting that excessive executive compensation can be bad for a company's owners and company efficiency.

I also suggest that there are a lot of capable people that can do what CEO's do for more reasonable compensation. I suggest that they allow owners to vote on executive compensation instead of a board of cherry-picked corporate executives. Let the free market of stockholders decide if an executive is worth his pay.

Didn't the low-level executives and the workforce also contribute to that profit? Why does the CEO cut keep getting bigger and bigger? How is that equitable? I think that the CEO compensation be better in line with workforce compensation for the benefits of the profits of the owners.