Each year Forbes magazine lists the multimillion-dollar earnings of top entertainers and professional athletes.
Oprah Winfrey has made that list each year for more than two decades. Her annual income adds up. With wealth now in the billions, she ranks among the world's richest people. Entertainment and pm sports have come to be called winner-take-all labor markets because a few key incividuals critical to the overall success of an enterprise are richly rewarded. For example, the credits at the end of a movie list a hundred or more people directly involved in the production. Hundreds, sometimes thousands, more work behind the scenes. Despite a huge cast and crew, the difference between a movie's financial success and failure depends primarily on the performance of just a few critical people-the screenwriter, the director, and the lead actors. The same happens in sports. In professional golf tournaments, attendance and N ratings are significantly higher with Tiger Woods in the mix. In professional basketball, LeBron James has been credited with filling once-empty seats and boosting the value of his team by $160 million.lbus, top performers generate a high marginal revenue product.
But high productivity alone is not enough. To be paid anywhere near their marginal revenue product, there must be an open competition for top performers. This bids up pay, such as the $20 million per move garnered by top stars-about 2,000 times the average annual acting earnings of Screen Actors Guild members. Simon Cowell reportedly earned $36 million judging American idol in his final contract year; he was expected to leave that show to develop a new one that could earn him twice as much. In professional sports, before the free-agency rule was introduced (winch allows payers to seek the highest bidder), top players couldn't move on their own from team to team. They were stuck with the team that drafted them, earning only a fraction of their marginal revenue product.
How would the UAW benefit for increased demand for GM and Chrysler vehicles?