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CEO & Employee Pay Discrepancy: How the Government’s Policies Have Encouraged the Gap | Author: David R. Meals

CEO & Employee Pay Discrepancy: How the Government’s Policies Have Encouraged the Gap | Author: David R. Meals

In the United States, one of the most striking illustrations of the increased inequality of income distribution over recent decades is the outsized growth in CEO compensation in contrast to the compensation of the contemporaneous average working man or women. The ratio of CEO pay to factory worker pay rose from 42-to-1 in 1960, to a height of 531-to-1 in 2000 at the height of the stock market bubble, and it was at 411-to-1 in 2005 and 344-to-1 in 2007. Interestingly; this ratio is about 25-to-1 in Europe. “[A]fter adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990’s, more than quadrupled the CEO pay average for the 1980’s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.”

The increase of the CEO versus employee pay gap, along with the subject of growing income inequality in the United States, has been of concern for some time, but is an issue in particular during the current prolonged economic slump that began with the burst of the housing bubble and subsequent financial crisis, especially mortgage derivatives. As the United States endures its worst economic conditions since the Great Depression of the 1930’s, populist rhetoric has coalesced around the theme of the “99%” versus the “1%”, with the 1% loosely defined as the “richest” citizens of our country.

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