« Rent gradients and real estate | Main | The Social Security tax cutoff »

December 05, 2007

What's behind superstar salaries?

Some people earn salaries that are difficult to comprehend, salaries of tens or hundreds of millions of dollars per year. Why are the salaries of these superstar entertainers, athletes or business people so high? N.C. State University economist Dr. Mike Walden explains. Listen

"There are two factors behind these high salaries," says Walden, North Carolina Cooperative Extension economist and professor of agricultural and resource economics. "First of all, the person who is earning those high salaries has to have a talent that is not easily duplicated, that is fairly unique and, therefore, is in very short supply.

"This can be an entertainer, someone whose acting ability, singing ability or entertaining ability people love and adore - and people say we have to see that person, there is no replacement. It can be a professional sports player who is at the top of their game in their sport, and there are no replacements. Or it can even be in the business community, a very successful executive - a CEO who is able to take companies and improve their bottom line. So that's one factor, you have to have this unique talent.

"The second factor is that the person has to operate in a large marketplace, either a national marketplace or, in fact, a worldwide marketplace, where their talents are in demand on a large stage," Walden adds.

"When you put those two factors together - unique talent operating in a large marketplace - you're gong to get very, very big salaries, which you term the superstar salary," he explains.

Posted by Dave at December 5, 2007 08:00 AM