CEO pay up 940 percent over 40 years, compared to workers' 12 percent
CEOs at the top 350 firms in 2018 took home an average of $17.2 million—278 times what workers made.
You know it’s bad when heiress Abigail Disney chastises CEOs over how much they rake in each year.
With workers feeling underpaid despite the so-called “recovery,” one might ask what they’re complaining about, since wages have risen (a little) since the Great Recession. But the truth is that according to the Economic Policy Institute, employees are only getting about 12 percent more than they did 40 years ago—back in 1978, when a loaf of bread cost 33 cents and a person could buy a house for under $65,000.
Related: The GOP wants to kill rule that led to astronomical CEO pay
The EPI analysis found that while CEO pay has risen 940.3 percent between 1978 and 2018 (or 1007.5 percent, depending on how stock options are accounted for), worker pay has grown a pitiful 11.9 percent. That amounts to CEOs at the top 350 firms in 2018 taking home an average of $17.2 million—278 times what workers make. Meanwhile, back in 1965, the ratio of CEO-to-worker pay was 20 to 1, and even as recently as 1989 it was 58 to 1.
“Exorbitant CEO pay is a major contributor to rising inequality that we could safely do away with,” study authors Lawrence Mishel and Julia Wolfe contend. ”CEOs are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills.”
“When every industry stock goes up, their stock goes up, and they’re rewarded as though they hit a triple,” Mishel said in a CBS News report. ”That’s not for performance as they are sitting in the bleachers.”
And according to Wolfe, “Ballooning CEO pay is not a reflection of the market for executive talent. We know this because CEO compensation has grown far faster than even the top 0.1 percent of earners. This means that CEO pay can be curbed with little, if any, impact on the output of the economy or firm performance.”
CBS News also highlights Ms. Disney’s efforts on behalf of underpaid workers, as she not only criticizes CEO pay—calling it a “moral issue”—but highlights the fact that some low-wage workers are “sleeping in their cars and rationing insulin,” and workers may often be laid off without severance at the same time executives are lining their coffers with buybacks and cash dividends.
The solution? The authors offer several possible policy changes. “Implementing higher marginal income tax rates at the very top would limit rent-seeking behavior and reduce the incentives for executives to push for such high pay,” they write. “Another option is to set corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation … Other policies that could potentially limit executive pay growth are changes in corporate governance, such as greater use of ’say on pay,’ which allows a firm’s shareholders to vote on top executives’ compensation.”
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