Mind The Gap- The Widening, Worsening Pay Gap Between the CEO and the American Worker

Travis's picture

According to the Institute for Policy Studies (www.ips-dc.org) which has been tracking executive pay since 1994, there's a widening compensation gap between U.S. CEOs and American workers, and there's no end in sight.

In a brief article on the topic by Yahoo!'s Heesun Wee, the average ratio between salaries for CEOs and the American worker in 2007 was 344 to one.  This figure dipped slightly last year, 2008, to 319 to one.  But according to the Institute, this figure is set to rise, which, according to IPS's director John Cavanagh is "really worrisome."

"If nothing is done -- if the federal government does nothing this fall in terms of CEO pay, the ratio will likely go up this year and there will be huge stock option gains by the CEOs of some of the worst-run companies," Cavanagh proclaims. 

The topic of CEO pay in Washington may not currently be on the front burner, as the markets have rallied and political focus has shifted toward healthcare reform.

Cavanagh supports the pay chasm as a critical issue, the gap is "still very, very high" higher than most other countries "decent and in sync with democracy."  (His words, not mine).  He proclaims that if you go back a generation in America, on average, the CEO to worker pay gap was about 30 to one. 

According to another article published by the IPS- for various reasons, beyond the harsh statistics, a few bills in Congress (buried somewhere, for sure) may hold a hint for things to come. 

One such bill, sponsored by Rep. Jan Schakowsky of Illinois "would extend tax breaks and federal contracting preferences to companies that meet benchmarks for good corporate behavior."  Okay, so what?  But one of the said "benchmarks" is not paying any executive more than 100 times the wage that goes to the company's lowest-paid worker.  Legislations' message to Corporate America- if you overpay your CEO- you're not getting taxpayer dollars.

So if you aspire to become CEO one day.  You may only make 100-times your current salary and not 300. 

What can I say- climbing to the top is not what it used to be. 

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Sqworl's picture

add to that John Mack's new 23M nyc townhouse with garage for 12 cars....12 fucking cars...

Anonymous's picture

And now he also "owns" a resort hotel in Maui and more commercial real estate each week.
Also, all financial engineering CEOs deserve every penny because our ATMs work and we are not in a great depression (yet). Sure we have more unemployed and our country can't borrow much more, at least we saved the CEOs who might spend the taxpayer money to save the peasants.

Anonymous's picture

Those CEO's are "adding liquidity to the market". Is that like "trickle down"?

lynnybee's picture

Please don't swear.    This is one of my favorite websites & we owe our respect to Mr. Durden for creating this wonderful website.     It has really opened my eyes & given me the education that I needed in order to understand what is going on in this United States.     Sincerely..........

Anonymous's picture

"Genius" CEO's like heralded Jack Welch of GE, GM Ford, Chrysler, AIG, Goldmans Blankfein, Rubin, etc etc would all be fired. ButObama gave GE/Jack Welch a 300 billion $ credit. please thank Obama for the free money program for failed CEO's. More money for incompetent CEO's; thank obama for that.

digalert's picture

Uh 59135, Jack Welch is retired, has been. Jeffery Immelt is anti-America commie loving Oblama slobbering fool running GE into the ground now.

Anonymous's picture

Jack Welch commenced the metamorphosis of GE from a manufacturing company into an investment bank during his tenure.

He's more responsible for beginning the wipe out of shareholder value than Immelt, who of course is not blameless.

But Welch has gotten away with billions while making shareholders wish they never heard of him.

Sam Malone's picture

Five years ago we would have called this the Brazilianization of the US workforce, except Brazil's middle class has reemerged in force of late. I'd suggest calling it the NorthAmericanization of the US labor force, but I doubt Canada shares in this unfortunate shift.

ZerOhead's picture

Ha ha ha ...

Ever hear of NAFTA? When the U.S. dollar tanks it will suck the remaining manufacturing jobs out of Canadian branch plants back to the good old USA or to China.

Remember that the Prime Minister, Steve Harper created subprime in 2006 upon assuming office... even opened the door to AIG to sell mortgage insurance backed by $200 billion in governmant gaurantees. Then he installed a career Goldmanite (Mark Carney) at the helm of the Bank of Canada.

SquidCo has already captured this country too... Good luck with that Canada!

Sam Malone's picture

At least the Canucks can keep their currency propped on the evenutal rising price of their energy reserves, which will occur during a period of crippling inflation in the US that will render the US dollar worthless. And with it the wages of US workers.

ZerOhead's picture

Ha ha ha again...


Seems Canada under Harper is trying to divest itself of ALL its natural resources to foreign interests. Oil production is around half foreign owned and now the Chinese want in. They will not be turned away.

As for those 'royalty windfalls'... the current royalty is 1% of gross revenues. Heck even the Kleptocrats in Nigeria have negotiated a sweeter deal! And even better is the fact that no taxes are payable untill all (inflated) capital costs are recovered. No wonder the cost 'over-runs' are so high.

The high energy prices will cause the Canuck-buck to rise for certain, which will only serve to gut the remaining manufacturing and service jobs faster...

As I said before... 'Good luck with that Canada'... you're coming along for the RIDE... ha ha ha!

Veteran's picture

Hey pal, no one has accused America of being "decent and in sync with democracy"  for quite some time 

cougar_w's picture

How else can they suck up 98% of the planet's wealth? I mean sure they could just steal it at gun point down on the street, or knock over banks and empty the vaults, but that would be too obvious. It's also inefficient; automatic transfer straight into one's personal back account is so much easier. And every so often, get the Board to tack on another zero to the number in question. All those guys are doing the same thing, too.

Hey fellow Americans, it stopped being "the dream" a long time ago. Now it's just institutionalized rape. Then they'll inflate away even the crumbs they let fall. They've got all the control, all the power, and all the options. The rest of us got nothing. Will get nothing. Not a chance.

Buy those gold futures, oh yeah love that paper wealth. Wait to die. Wait for it...


BobPaulson's picture

No actually, they wouldn't rob a bank, because they would soil themselves if they had to.

One day, their downfall will be that the people in the street are far less afraid to die than them.

VegasBD's picture

I believe that day is near.Good thing blackwater is getting well and trained over there in the middle east....americans should be way easier to handle. Dont need guns to fight americans, just a flat screen TV with american idol on should do it.

lookma's picture

"If nothing is done -- if the federal government does nothing this fall in terms of CEO pay, the ratio will likely go up this year and there will be huge stock option gains by the CEOs of some of the worst-run companies," Cavanagh proclaims.

How about we stop the government from causing this growing divide?

Maybe we could turn off the funny money pump?  Pretty please?

Gabriel Gray's picture


But then they would have to admit they created it.. not a chance, but excellent observation.

Cheeky Bastard's picture

off topic; Yo Marla, can we get some music ?

TumblingDice's picture

In my economics thesis I found a non-spurious correlation between debt and inequality (among other things). Deflation was a natural remedy to restore balance back during the GD. Inequality peaked in 1929, total debt peaked later in 1932 I think, then government debt peaked after WWII and was the signal for the beginning of a new cycle of debt and inequality. Those things need to happen if a start of a healthy new cycle is the goal. Unfortunately it isn't.

Anonymous's picture

Why start there? Let's just talk about the American caste-system: At the top, we have the blue bloods -- the financial workers. For whom "a million dollars is not a very high salary".

It wouldn't be so bad if it were a de facto system. But we *protect* this system and tax all other castes to do so.

Bankster T Cubed's picture

Let them eat shares.  Let them eat their houses.  Oh yeah, they already ate them....tough shit, give that CEO a raise.

ghostfaceinvestah's picture

It is only fitting that a banana republic economy has banana republic wage disparity.

Also note that a constant wage disparity leads to a growing wealth disparity.

Sam Malone's picture

And lord knows we can't bank on wage growth to repair the losing end of the ratio with 9.7 percent unemployment...I wonder how many of those still employed had to digest a paycut.

TumblingDice's picture

If history is any indicator we should have US interests fleeing the country any time now after civil unrest gains momentum.

cougar_w's picture

US interests fleeing the US. Helicopters pulling quants and hedge fund managers off the roofs of buildings in Manhattan. Flying them out to Brazilian-flagged cruise ships parked just outside US territorial waters, bound for The Cayman Islands.

Of course, they'll be taking our money with them. Still, might be worth it just to see them leave.


Anonymous's picture

You guys are underestimating how hard it is to run a company into the ground!!!

Anonymous's picture

And get rewared to boot.... It's nice being able to f_uck up royally, and still be overly compensated......

cougar_w's picture

Who said they are f*cking up? That implies they made a mistake.

I believe the more correct term is "looting".


Anonymous's picture

"not paying any executive more than 100 times the wage that goes to the company's lowest-paid worker"? Really?

A Bangladeshi garment worker makes on average $0.22 per hour. The median annual income of male American full time workers in 2007 was $45K. So the median male full time worker at a multinational garment corporation already is paid more than the company's lowest-paid worker. We all, already, live like CEO's depending on your reference point. We are all equally guilty of squandering and hording wealth.

Anonymous's picture

The reference point doesn't really exist as you can't buy stuff at Bangladeshi prices in the US. In Bangladesh, $45k will definately go a loooooooooong way.

Anonymous's picture


Hell of a good point!

Anonymous's picture

Democracy cannot survive the current level of inequality in the US whose gini coefficient is now in Gabon range. CEO pay is only a portion of that but the reason for the inequality runs through corporations.

Corporations will continue to garner an increasing share of all profits and cash flows and distribute income ever more inequitably. The alternative is Kunstler's new Middle Ages. After all that's what Paulson told congress and they agreed.

As for democracy let's face it, it wasn't really all that great after negros were allowed to vote.

Cheeky Bastard's picture

Marla, Tyler, ZH; this kind of racist posts SHOULD NEVER PASS THE GODDAMN FILTER !!!!! remove this shit ...

darkness's picture
darkness (not verified) Sep 4, 2009 6:46 PM

It's a disgrace how this is allowed to happen.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Anonymous's picture

The more money rich people make, the more minimum wage proles they can then hire to mow their estates, wash down their yachts and squeeze their toothpaste. And, if you're an attractive young female, the better your prospects of finding employment with rich CEOs as a high-class call girl.

A little recognized benefit of wealth concentration in the smallest little sliver of America is that that sliver will then carry more of the tax burden. When the top 1% of us are earning 99% of the national income, the other 99% of us will only have to fund 1% of the taxes. 99% of us will thus be getting nearly a free tax ride.

Another benefit the wealthy CEO bequeaths us are regular pink slip vacations. Months of vacation for most of us following a layoff are only ours to be enjoyed while the CEO is hardly ever - no, make that never - the beneficiary of this generous time off from the job.

I only see a bunch of commies here, complaining about how much more than you other harder working CEO people are earning.

TumblingDice's picture

I just reread your post and realized it contained a subtle tone of sarcasm.

Sarcasm is not my strong point.

Anonymous's picture

I was only repeating what I hear on FOX every evening. I'm pretty sure Cavuto has been all over the topic.

Why do the proles hate hard working CEOs so? Class envy? Don't you want to be rich someday too? Proles hire no one, the CEO is the only one creating jobs.

What's next? Pitchforks and torches? The CEO will only then be forced to build higher walls around his seaside estate and chopper into work each day instead of taking the limo.

Anonymous's picture

CEOs claim their pay is so high because they have rare talent that is in short supply and that they must be compensated for it or else they'll jump ship to another company who will pay them more. Obviously there must be a shortage of CEOs.

That is why I'm writing my congressman to propose the creation of the HB-CEO visa. It will allow foreign executives to come and work here legally in the United States. We'll see how rare their talent is when American CEOs have to compete against Chinese CEOs on their own soil.

Heck, even European CEOs make far less than American CEOs. Something is out of whack here and the HB-CEO visas should help take care of that.