Pay Gap Between CEO's and Rank-and-File Workers Continues to Widen Drastically

The pay gap between the CEOs of major corporations and their rank and file workers has continued to widen, upholding a trend of inequitable wage growth that has been ongoing since the 1990s. A new Economic Policy Institute report shows CEOs of America’s top 350 companies earned 312 times more than their rank and file workers.

The Guardian posted the report on Thursday morning, showing that CEOs of major corporations got an average pay rise of 17.6% over the last year while rank and file employee pay rose just 0.3% over the same time. Rank-and-file employees saw their wages stall, for the most part, while CEOs took home an average of $18.9 million in compensation, according to the report.

The Guardian noted on how this pay gap has continued a trend it started back in the 90s:

The pay gap has risen dramatically, with some fluctuations, since the 1990s. In 1965 the ratio of CEO to worker pay was 20-to-one; that figure had risen to 58-to-one by in 1989 and peaked in 2000 when CEOs earned 344 times the wage of their average worker.

CEO pay dipped in the early 2000s and during the last recession but has been rising rapidly since 2009. Chief executives are even leaving the 0.1% in the dust. The bosses of large firms now earn 5.5 times as much as the average earner in the top 0.1%.

Of course, there has been added visibility on this pay gap since companies have been forced to report it in their financials. This has highlighted some extraordinarily egregious pay gaps, such as at those at McDonald’s and Walmart:

The astronomical gap between the remuneration of workers and bosses has been brought into sharper focus by a new financial disclosure rule that forces companies to publish the ratio of CEO to worker pay. Last year McDonald’s CEO Steve Easterbrook earned $21.7m while the McDonald’s workers earned a median wage of just $7,017 – a CEO to worker pay ratio of 3,101-to-one. The average Walmart worker earned $19,177 in 2017 while CEO Doug McMillon took home $22.8m – a ratio of 1,188-to-one.

These astounding numbers are even more mind-blowing when you consider that they all come inclusive of the benefit that technology companies don’t traditionally pay their CEOs a significant amount of a salary in cash. Many CEOs of these companies have their personal wealth tied up in the stock of the companies that they are running or have founded. 

For instance, Amazon's Jeff Bezos took a salary of just $1.7 million in 2017 and Facebook's Mark Zuckerberg took home $8.8 million. That compares to their workers who pocketed $28,446 and $240,430, respectively. However, that doesn't account for the stock they already own appreciating. According to Forbes, "Bezos’s personal fortune now tops $154bn while Zuckerberg’s is close to $66bn".

The self fulfilling prophecy of rising CEO compensation, which is estimated to partly be a result of the stock market's rise and "everybody thinking their CEO is better than the next one", according to Lawrence Mishel, a distinguished fellow at the Economic Policy Institute, has now pushed the rising compensation rate to outgrow the rise in the stock market.

Between 1978 and 2017 CEO compensation has increased by 979%. Over the same period the S&P 500 Index of the US’s largest companies grew 637%.

At the same time, the Guardian article notes, while the S&P 500 index was up 637% from 1978 to 2017, the typical rank and file worker only saw his or her pay package rise just 11.2%.

As is so often the case, the report fails to venture the guess that monetary policy may also have a hand in creating this enormous pay gap. While the government selectively chooses to bail out those that are "too big to fail", the average rank-and-file worker sees little to no benefits of such a ludicrous policy. Under the selective bailout style Keynesian system as it exists today, this data just continues to prove that it is easier for the rich to keep getting richer while the worker fails to share in the same benefits.