How to Make 231 Times More Than The Person in the Next Cube
NEW YORK (MainStreet) If a 3% raise is the new normal, then how would you classify a 725% bump in pay? Above-average? Something-to-shoot-for? Perhaps unfricking believable? Economic Policy Institute (EPI) President Lawrence Mishel and research assistant Natalie Sabadish have analyzed executive compensation and found that from 1978 to 2011, CEO compensation increased more than 725%, compared to a raise in pay of only 5.7% for punch-the-clock workers during the same period.
Let's take an early and long lunch.
The widening gap in income between the rare air of the top 1% and the earth-bound rest of us is a trend growing exponentially. The CEO-to-worker compensation ratio was roughly 20-to-1 in 1965. That may seem bad enough, but that bloated ratio grew to 231 times more than your average commute-to-the-job-in-an-economy-car worker in 2011.
It seems to be the heads and highly-paid minions of those too-big-to-fail financial institutions that have been the primary driver of the more than doubling of the income share of the top 1% over the past three decades.
According to the EPI study, executives and workers in finance accounted for 58% of the expansion of income for the top 1% from 1979 to 2005. And they accounted for more than two-thirds of the increase in income for the very top muckety-mucks in the thinly sliced 0.1% over the same time frame.
"CEOs have fared far better than the typical worker, the stock market and the U.S. economy as a whole since the late-1970s," says Mishel. "Compensation growth for executives and for top-tier financial-sector workers has fueled the enormous growth of incomes at the top."
Some other unsettling news: CEO compensation grew 78.7% between 1965 and 1978, three times the growth of the compensation of private-sector workers, Mishel reported. "It is interesting that the stock market (as measured by the Dow Jones and S&P indices) fell by about half at the same time," he said.
The study notes that executive pay grew strongly over the 1980s but really exploded in the 1990s, peaking in 2000 at more than $19 million -- a growth of 1,279% and 1,390%, respectively, from 1978.
"This growth in CEO compensation far exceeded even the substantial rise in the stock market, which grew 439% and 513% in value over the 1980s and 1990s," Mishel says. "In stark contrast to both the stock market and CEO compensation growth was the 3.6% decline in the compensation of private-sector workers over the same period."
--Written by Hal M. Bundrick for MainStreet