If There Is No Risk, There Is No Reward.
As a potential future business owner there a number of things that one must always keep in mind. When faced with the topic on whether or not it is ethical for business owners to earn much higher profits than they pay their employees I find myself a bit torn. With this being said, I do ultimately think that it is ethical for a business owner to earn a higher profit/ salary compared to what they pay their employees. To elaborate, the business owner is the one who took the initial risk and invested their own capital to create and or sell a good or service with the hopes of making a profit. When first starting out as an entrepreneur there is always some degree of uncertainty surrounding whether or not the business will be a success or a complete failure. In each case, the owner is the one who has to either suffer the consequences and monetary loss of a failed business or reap the benefits of a successful one. The employee never assumes this risk because they have no real capital invested unlike that of the owner. Likewise, this allows the employee to have no fiduciary constraints or ties to the business, which allows them to have more flexibility and freedom in reference to how they choose to earn their income. Moreover, if the business owner is successful and does make a profit, he/she “saves the laborer from the risk that the product might not be sold at a profit, or that he might even suffer losses” (Rothbard, n.d., p. 38). If there is no risk, there is no reward. This statement alone solidifies why it is ethical for business owners to earn higher profits than their employees. If the employees want a “big reward” then they must first take a “big risk”.
Rothbard. (n.d.) Ethics of liberty (pp. 38-39).