Forward Economics
Chapter 7
Solving the Problem of Wage Stagnation and Inequality
Two roads diverged in a wood, and I –
I took the one less traveled by.
And that has made all the difference.
Robert Frost
From this point forward, we’ll examine how the forward business model solves a series of major, seemingly intractable problems as it grows within the broader economy. To begin, let’s look at one of the most persistent: stagnating wages and widening inequality.
If we want wages to rise continuously for all stakeholders as the economy grows, that outcome must be written into the rules of how businesses operate.
That may sound obvious — but apparently, it isn’t.
As we saw in Chapter 4, today’s dominant model of capitalism includes no such mechanism. When profits are realized, the business owner or board of directors decides whether those profits are shared with workers. The problem is built right into the design: the owner faces a direct conflict of interest. A dollar not shared with workers is a dollar kept for themselves.
It isn’t hard to predict how that decision tends to go. A half century of data makes it plain to see.
According to the Federal Reserve, America’s real (inflation-adjusted) gross national income nearly quadrupled between 1970 and 2024, from $5.4 trillion to $23 trillion. On a per-person basis, that’s an increase from roughly $23,000 to more than $69,000 a year. In theory, each worker today could be earning three times more than someone doing the same job in 1970 if those gains had been distributed broadly.
Instead, for 80 percent of American workers, real wages have barely moved. Shareholders have captured nearly all of the additional wealth the economy has created.
One doesn’t need a Ph.D. in political science to see that this is dangerous for both democracy and social cohesion.
There’s no shortage of theories for why this happened. But the explanation is simple.
Human history shows that when people in power are given the choice between sharing the economic pie and taking more for themselves, most take more. Figure 5.2 shows what follows: an economy drifting more and more toward feudalism, where gains accrue to the top while everyone else treads water.
Now let’s see how a forward economy tackles this head on.
How the Forward Business Model Changes the Equation
In the forward economy, the operating agreement of every business requires it to pay profits forward to advance the common good. Profit-sharing isn’t left to chance or hope — it’s built into the company’s DNA.
To see this more clearly, consider a real example: Allstate Insurance Company, one of the firms included in Irwin’s study.
In 2022, Allstate reported a net income of $5.5 billion and had about 42,000 employees. That works out to roughly $130,000 in profit per employee — money paid to shareholders, not the people doing the actual work.
The average Allstate employee earned about $80,000 that year.
If Allstate’s profits were to double in the future, those gains would almost certainly flow to shareholders, not employees, unless the owner or board chose otherwise. And history tells us how that choice tends to go.
Now imagine Allstate converted to a forward business. Using the rules from Chapter 4, profits must either be reinvested back into the enterprise or distributed among stakeholders according to a fixed charter.
If profits are reinvested (Rule 1), the company grows stronger — hiring more staff, developing better technology, and expanding service.
If profits are distributed (Rule 2), they’re shared among:
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Employees
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Management (who are also employees)
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A Forward Investment Fund that seeds new forward businesses
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Noble causes chosen by employees
A typical charter might divide profits as follows:
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15% to management
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30% to employees
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45% to the forward investment fund
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10% to noble causes
In that framework, employees would receive 45% of Allstate’s profits — about $2.5 billion, or $59,000 per worker in 2022 — on top of their salary. Total compensation would rise to nearly $140,000 per employee, and those who contributed more could earn proportionally greater shares. If profits doubled the next year, so would the profit-sharing bonuses.
Through this simple, self-reinforcing mechanism — profit sharing by design rather than chance — every worker’s income rises automatically as the company prospers. Even early on, a firm like Allstate could increase pay by 50–75% with no additional cost to customers.
These results are illustrated below.
Figure 5.3: Comparison of Compensation at Allstate (2022) – Before and After
Such gains could be realized while also increasing R&D, marketing, and other growth investments, which will make the business even more competitive. And this isn’t a special case. Similar outcomes are possible across much of the economy, as Chapter 5’s data has shown.
The Broader Effect
Applied at scale, this mechanism rewires how prosperity flows.
Instead of wages stagnating for the masses while profits pile up at the top, the people doing the real work in the economy move upward together. Over time, the wage-stagnation problem disappears — not through regulation or redistribution, but by leveraging the most competitive form of free enterprise possible.
In its place emerges an economy that shares profits across the income ladder, strengthens the middle class, and steadily expands opportunity.
And that’s just the beginning. A forward economy should also heal other long-standing fractures — from environmental degradation to civic disengagement. But before we get there, one critical question remains:
If no investor ever gets paid back, how will this business model ever get started?
Who funds it?
Those questions lead us to the elephant in the room.
