Wage gap between C-suite and low-paid workers growing
CEO pay at 300 firms increased by $2.5 million to an average of $10.6 million, while median worker pay increased by $3,556 to an average of $23,968.
As inflation remains top of mind for lawmakers and businesses, the gap between the C-suite and low-wage workers is growing even wider. According to the Institute for Policy Studies the average gap between CEO and median worker pay jumped to 670 to 1, in 2021, up from 604 to 1 in 2002. Out of 300 firms studied, 49 of them had ratios above 1,000 to 1.
Seeing that with real dollars and cents, CEO pay at the same 300 firms increased by $2.5 million to an average of $10.6 million, while median worker pay increased by $3,556 to an average of $23,968.
The gap and ways to fix it seem to have bi-partisan support in Washington. About 62% of Republicans and 75% of Democrats have become so fed up with Corporate America’s ongoing executive excess that they would support an outright cap on CEO pay relative to worker pay, regardless of company performance, according to a Just Capital poll. Public support for capping executive pay has been building ever since a 2016 Stanford Business School survey found 52% of Republicans and 66% of Democrats favoring pay limits.
According to the report, of 106 companies in the sample where median worker pay did not keep pace with inflation, 67 spent resources buying back their own stock. This is a move that can inflate executive stock-based pay. These repurchases totaled $43.7 billion.
The biggest buyback firms turned out to be retailers: Lowe’s, Target, and Best Buy. The typical worker at these chains lost ground while their bosses were blowing mega-billions on stock buybacks. With the $13 billion Lowe’s spent on share repurchases, the company could have given each of its 325,000 employees a $40,000 raise. Instead, median pay at the company fell 7.6% to $22,697, notes the Institute.
Related: C-suite, employees not on same wellbeing page: report
The Institute says there are policy reforms either being floated in Washington or ones that can be considered to help narrow the gap. They suggest the president could give preferential treatment in government contracting to corporations with narrow pay rations. Also under the Build Back Better bill, an idea has been floated for an excise tax on corporations with large pay gaps, and stock buybacks could be slapped with an excise tax on the amount spent by a company on buying back its own stock. This, the Joint Committee on Taxation estimates, could generate $124 billion in revenue over 10 years.