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Excessive CEO Pay Fuels Our Nation’s Expanding Income Inequality

 

The growing income inequality in the United States is making our economy very volatile and unstable. Executive compensation and CEO pay have helped to fuel that rapidly expanding wealth gap, as well as our country’s financial crisis. The Economic Policy Institute has just released a report detailing how the grotesque expansion of CEO pay has helped to create our nation’s huge chasm in income.

The EPI study, “CEO pay and the top 1% — How executive compensation and financial-sector pay have fueled income inequality“, by Lawrence Mishel and Natalie Sabadish, found:

• From 1978 to 2011, CEO compensation increased more than 725 percent, compared with an increase in compensation for workers of only 5.7 percent. 

• CEOs were paid, on average, 231 times more than workers in 2011. This CEO-to-worker compensation ratio includes the value of stock options exercised by executives. An alternative measure of CEO compensation that includes the value of stock options granted in a given year yields a CEO-to-worker compensation ratio of 209.4-to-1. By comparison, the CEO-to-worker compensation ratio was roughly 20-to-1 in 1965.

EPI CEO pay graph

The unequal growth in earnings enjoyed by the top 1% have come at the expense of the rest of us at the bottom of the financial food chain. How is it possible that over the last three decades the wages of the elite plutocracy rose 725%, while worker compensation grew just 5.7%? These kind of extreme inequities and wealth disparities bankrupt our democracy, rob investment in our vital infrastructure, and are turning our country into a severely stratified oligarchy.

 

graph image is via EPI