American CEOs are earning compensation packages that are more than ten times greater than they were three decades ago, according to a paper released last week by the Economic Policy Institute, a left-leaning Washington, DC think tank known for its rigorous studies. Meantime average U.S. workers made just 10.2% more in 2013 than they did 30 years ago. Top CEOs now make 300 times more than typical workers.
Further, says the study, the extraordinary rise in CEO pay has had “spillover effects,” pulling up the pay of other executives and managers. “Consequently, the growth of CEO and executive compensation overall was a major factor driving the doubling of the income shares of the top 1% and top 0.1% of U.S. households,” says the paper.
With the wealth gap a topic of discussion not just for Democratic presidential contenders like Hillary Clinton and Bernie Sanders, but also for Republicans, including front runner Jeb Bush, the EPI study is especially relevant right now.
The average CEO enjoyed a package including stock bonuses that was worth $15.3 million in 2013. That’s just a 2.8% rise over 2012 but the paper’s authors, EPI president Lawrence Mishel and research assistant Alyssa Davis, say it’s important to take the long view and to compare executive and manager pay hikes to languishing wages among workers outside of the C suite. The paper analyzed CEO compensation at the largest 350 U.S. companies from 1978 to 2013.
To compile the survey Mishel and Davis analyzed data from Compustat’s ExecuComp database, and data from the Federal Reserve Bank of St. Louis, the Current Employment Statistics program and the Bureau of Economic Analysis NIPA tables.
The study also says that the rise in CEO pay over the last 30 years is more than double the stock market’s gains in the same time period.
While high CEO pay has elevated the compensation of other executives, says the study, CEO packages are moving up even faster than those for executives and managers. In 2012 CEO pay was 4.75 times higher than the typical compensation of other earners in the top 0.1% of the economy.
The report says that CEO pay has been even higher in the past. In 2000, before the 2001 market crash, top CEOs made $20 million (all numbers in the study are expressed in 2014 dollars). In 2007 they made $19 million.
The paper also points out that high CEO pay “does not simply reflect the increased value of highly paid professionals in a competitive race for skills.” In other words, CEOs have not become more productive. Rather, they have grown more able to demand more valuable pay packages. If they made less or were taxed more, says the paper, “there would be no adverse impact on output or employment.”
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