What if you spend 20 years in school and save and change lives to earn less than a popular uneducated person. Well this can be the case if you're a doctor comparing yourself to a celebrity. The wage gap between educated professionals and celebrities is ridiculously massive, but is it justified?
Lets take a look at the wealthiest celebrities and what makes them special. The list of the highest earning celebrities are Oprah Winfrey, $2.8 billion, Michael Jordan, $1.7 billion, Kylie Jenner, $900 million, Jay-Z, $900 million, David Copperfield, $875 million, Diddy, $825 million, Tiger Woods, $800 million, and James Patterson. $800 million.
Probably the best example to look at is Oprah Winfrey. Her success story dates back to when she was born, which was in 1954 in rural Mississippi. Her family was poor and she often was moving in between her mother, father, and grandfather. As a black girl growing up in the southern part of the USA in the 1960s wasn't the ideal situation to be in to become one of the most influential people ever, however, this helped her do just that. The hard life that she experienced growing up helped mold this tremendous personality that she is well known for. Her grandmother often said how naturally Oprah took to the stage and performed. This personality led her to pursue television broadcasting in her life. In 1971 (while she was still in high school), a radio station noticed Orpah and she landed a position as a radio show host. She did so well that she then transferred to a TV show in Nashville and then after she moved to one in Baltimore, she finally settled in Chicago and hosted a low rated show called AM Chicago. Oprah had a unique style which resulted in an entirely new form of communication on television. She created an environment where guests felt inclined to share their stories despite being on national tv. Her total empathy with them often led to tears. This led her previously low-rated show to become the highest rated television show in Chicago. The show was later changed to the Oprah Winfrey show and was aired for 25 years.
This is important to why she earns billions because she is one people if the only if not the only person in the world who could bring her set of skills to a certain business. This set of skills and talent that she possesses creates large amounts of demand for her. This large demand in addition to the fact that there is only one of her (supply) creates a very high market equilibrium in the broadcasting economy. The broadcasting economy is also a very lucrative economy so this high market equilibrium generates loads and loads of income for her. In easier terms, she in the only person who can put up that entertaining show that people love to watch and because the only entertaining show that they want to watch is The Oprah Winfrey show, they get lots of streams; lots of streams = lots of money.
Lets take another yet very different example, Kylie Jenner. She was born into the Kardashian-Jenner household, a very wealthy and famous family that are basically treated like royalty. She, unlike Oprah, was very fortunate in this way. At the age of 17 she launched a cosmetics brand that’s now worth hundreds of millions. The reasoning why the brand is so much is not because of great quality or clever marketing, not saying that the Kylie Jenner brand didn’t have these qualities), rather because of Kylies last name. The Jenner name is a very prestigious one, and lots of people are willing to pay money to have a product from her. This is where supply and demand comes into play. The demand of a Jenner product is massive and the supply is a few sisters that exist. This also creates a very high market equilibrium.
An easier way to explain it is in terms of football. A top quality football player is in very high demand and the supply of a top quality player is very low. This creates a very high market equilibrium for the price / wage of the player. Lets take Lionel Messi as an example of this supply and demand curve. The demand for Lionel Messi is insanely high (Every club in the world desires him and is willing to pay top dollar for his signature). This combines with the supply of players his quality (How many people in the world that are as good as him). We can put this into a supply and demand graph.
For cases like the last three, They create inelastic demand. An inelastic demand is where the price doesn’t chance much for the amount of demand that there is. I will try to explain it in this graph. The demand on the bottom goes from 0 people to 1000 people. The Price on the left goes from $0 to $100. The price from P 1 doubles to P 2. This doesn’t change the amount of people who want to buy it by a lot, only decreases by %16. This is how designer brands work essentially.
Another economic factor to look at is supply. For the Kylie Jenner example the supply wouldn’t be referring to the product itself but at Kylie Jenner. There is only one Kylie Jenner in the world. Her situation is different to all of ours. Although there is only one of me and only one of you, she has the last name of Jenner.