system
Given the following post, respond as if you're commenting on Reddit:
human
How do owners take on more risk than employees? And does it justify their much higher pay?

It has often been said that the reason that workers are paid far less than owners/CEO’s and even shareholders is because they take on the risk of the company failing and losing money from declines in valuations.

I have also heard it argued that workers do also themselves take on a lot of risk when working for a company, for instance if the company performs badly they may be fired or pay may be deducted (often to prevent the wealth of the owners coming down). They therefore may not be able to afford rent, food and other necessities and as such the risk of joining is high. 

I can also think of two responses to this point: 
1. The worker can always find a new job (though this depends heavily on the labour market and if they were highly specified it may be harder for them to find a new job that pays enough to support their prior lifestyle)

2. The worker will never lose money, merely not receive more in the future, whereas the owner will lose wealth if the company fails. (Though I’m unsure if this point is entirely true)

So the ultimate question is, is there substantial risk taken by owners to justify the often far higher pay/wealth accumulation?
gpt
No one is compensated purely for risk - employees are compensated for supplying labor and shareholders are compensated for supplying capital. Each then earns a risk premium based on how risky the option they choose is relative to their next best option.

Employees face comparatively little risk - the risk of losing your job is inherent to any job and leaves you in no worse position than not having a job in the first place. They're paid 1 month in arrears, so at most they have a couple of months outstanding if the business fails and, in the event of failure, they typically have the highest ranking claim against the business besides the costs of the bankruptcy itself. In many jurisdictions there are also government schemes to cover the unpaid wages of failed businesses.

For shareholders, they can earn risk-free returns by investing in government bonds. The relative risk of investing in equities is substantial - they pay money upfront with no guarantee of even receiving the principle back, never mind profits. In the event of failure, they rank last, paid after all employees, suppliers, creditors etc, typically losing everything. As such, they earn a significant risk premium - although less than you might imagine: market risk premiums are typically around 4-6%.

For owners/founders, they're a hybrid of employee and shareholder, plus there's an element of compensation for "entrepreneurship" - more than just taking risks, they had a novel idea, spotted some advantage etc.

For CEOs, they're basically just highly skilled employees - they're not compensated for risk, they're compensated by shareholders for the perceived value they add to profits. Debateably, their high pay also reflects exploitation of the principle/agent problem, where CEOs basically set their own pay, subject to shareholder outrage, which gives them significant latitude because shareholders are typically diffuse and hard to organise.