Why Skyrocketing CEO Pay Hurts Everyone
It’s no secret that executive pay has spiraled into the stratosphere in America. As a result, a large income gap has developed, creating a chasm between the rich and poor like never before. While examples of obscene wealth disparity are seen around the world, in places like India, Saudi Arabia, and Russia, Americans always took pride in our high degree of social mobility, and that we took care of each other. This is becoming less and less the case.
The Economic Policy Institute recently released data which reflects the high degree of wealth disparity. It found that since 1978, CEO pay has increased by 937 percent, compared to a paltry 10.2 percent for the average employee. In their study, the EPI also found that the average CEO’s salary in 2013 came in at $15.2 million, an increase of 2.8 percent from 2012 and up 21.7 percent since 2010. These numbers may indicate that some companies took advantage of the financial crisis to shift more profit towards the paychecks of executives, rather than stave off layoffs and other cost-saving measures.
Al-Jazeera America points out that while the average annual salary figure of $15.2 million is very high, it’s not quite as high as it was in 2000 prior to the 2001 stock market crash, when salaries averaged $18.5 million. While high CEO salaries can be used as an indicator of a strong economy and strong markets, this may not be the case with America’s current situation where the median household income averages around 0.33 percent of a CEO’s salary today, at roughly $51,000.
“The increase in CEO pay over the past few years reflects improving market conditions driven by macroeconomic developments and a general rise in profitability. For most firms, corporate profits continue to improve, and corporate stock prices move accordingly. It seems evident that individual CEOs are not responsible for this broad improvement in profits in the past few years, but they clearly are benefiting from it,” the report says.
“This analysis makes clear that the economy is recovering for some Americans, but not for most.”