- A new report from the left-leaning Economic Policy Institute finds that CEO pay has ‘skyrocketed.’
- Since 1978, CEO compensation has grown by 1,322%, with CEOs paid 351 times more than the typical worker.
- But the average worker may now have growing power over wages and employment.
- See more stories on Insider’s business page.
Over the past five decades, CEO pay has skyrocketed – but the average wage for workers hasn’t.
A new report from the left-leaning Economic Policy Institute, authored by Lawrence Mishel and Jori Kandra, finds that CEO compensation has grown by 1,322% between 1978 and 2020.
In contrast, the report finds that the typical worker saw their compensation grow by just 18% during that time period.
As Insider’s Ben Winck and Andy Kiersz previously reported, wages have made up less and less of the country’s gross domestic product over the past five decades. As the economy grew, wages didn’t keep pace.
That could also be seen in the discrepancy between CEO and worker pay, which was 351-to-1 in 2020. While the authors note that the CEO to worker compensation ratio peaked in 2000 at 366-to-1, it’s still higher than any time from the 1960’s through the 1990’s.
They used a “realized” measure for compensation, which accounts for stock awards when they were vested, and stock options when they were cashed in. Under the “granted” measure, which values compensation plans based on when stock packages were granted, compensation was slightly lower.
Inequality between CEOs and everyone else even extends to the top. The report also looks at CEO compensation in comparison to the earnings of the top 0.1% of earners. The authors found that CEO compensation was 6.44 times higher than what those in the top 0.1% made in 2019, based on the most recently available tax data from the IRS.
“The CEOs are in a different stratosphere,” Mishel told Insider, adding: “It’s not just that the CEOs are so-called highly skilled or highly educated, they’ve done far better than the average earner who’s very highly skilled in the top one-thousandth, or very highly educated.”
Income and wealth inequality have gotten even more extreme during the pandemic as those at the top pull away from everyone else. The world’s richest people added $5 trillion to their wealth in 2020, according to the Forbes billionaire list. Forbes found that a record-high of 493 new billionaires joined their list in 2020. A March study from the left-leaning Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS) found that America’s billionaires got 44% richer during the pandemic.
However, workers are gaining more power over wages and employment conditions in the red-hot labor market as the economy reopens.
Millions of workers are quitting their jobs as wages go up, and employers scramble to offer more in historically low-paying professions. Of course, millions of workers remain unemployed, and wages in industries like elder care are still considerably low, but it still marks substantial wage growth for America’s lowest-paid workforce.
Mishel said that he thinks unemployment will continue to drop substantially by the end of 2022.
“I think the pressure on employers to improve wages and benefits will continue,” Mishel said. He said that Biden administration policies addressing labor standards – like raising the minimum wage and improving collective bargaining – could also contribute to a greater shift.
“If those are able to be enacted it’ll reinforce a shift in power towards workers, which is something they desperately need – because they’ve been on the losing end for four decades.”