America’s chief executive officers were paid $17.2 million on average in 2018, that’s up 1008% since 1978. Pay for average workers, though, grew just 12% in the same time period.
A new study, released by the Economic Policy Institute (EPI) Wednesday, found that the ratio of CEO-to-worker compensation was 278-to-1 in 2018, up from a ratio of 58-to-1 in 1989.
“While wage growth for the majority of Americans has remained stagnant, CEO pay continues to grow strongly the last few years,” said EPI Distinguished Fellow Lawrence Mishel, who penned the study. “The escalation of CEO compensation has fueled the growth of top one percent incomes and widespread inequality across the country.”
The study, which was based on average CEO pay of the top 350 firms, also found that CEO compensation was not in line with growth in company earnings, the wage growth of the top 0.1 percent of earners or college graduates. Instead, said Mishel, the compensation was tied to growth in the stock market and, well, because of CEOs’ ability to exert influence on companies board of directors and bolster their own pay.
“Ballooning CEO pay is not a reflection of the market for executive talent,” said EPI Research Assistant Julia Wolfe in a statement. “This means that CEO pay can be curbed with little, if any, impact on the output of the economy or firm performance.”
CEO pay has increased just over 7 percent in the last two years, mostly because of increases in stock compensation. CEOs averaged $7.5 million in market compensation 2018, about half of what they made in total.
A number of 2020 Democratic candidates have campaigned on growing wealth inequality and have proposed solutions to minimize the gap between the 1 percent and working Americans.
“The American people are sick and tired of corporate CEOs who now make 278 times more than their average employees, while they give themselves huge bonuses and cut back on the healthcare benefits of their employees,” Vermont Senator and 2020 candidate Bernie Sanders told Newsweek on Wednesday.
“We need an economy and a government that works for all of us, not just the top one percent. That means, among other things, raising the minimum wage to at least $15 an hour, making it easier for workers to join unions, guaranteeing healthcare as a right, and demanding that the wealthiest people and most profitable corporations pay their fair share of taxes,” he continued.
Sanders has proposed raising tax rates on the top 0.2 percent of Americans, as well as taxing capital gains and dividends as ordinary income.
Senator Elizabeth Warren has also proposed a wealth tax for Americans with more than $50 million in assets and a stock market transaction tax to limit income inequality. “The rich and powerful run Washington,” she tweeted. “Here’s one benefit they wrote for themselves: After making a killing from the economy they’ve rigged, they don't pay taxes on that accumulated wealth. It’s a system that’s rigged for the top if I ever saw one.”
Warren has also proposed the Accountable Capitalism Act, which would require large companies to give employees a vote on their corporate boards, thus putting a new check on CEO compensation.
Nicole Goodkind is a political reporter at Newsweek. You can reach her on Twitter @NicoleGoodkind or by email, N.Goodkind@newsweek.com.
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