An analysis published Tuesday shows that the top executives of the largest corporations in the United States have seen their pay soar by nearly 1,500% over the past 43 years, helping to fuel a massive surge in inequality as workers’ wages lag.
Between 1978 and 2021, according to new research from the Economic Policy Institute (EPI), CEO compensation at the 350 largest publicly traded U.S. companies rose by an inflation-adjusted 1,460%, far outstripping the 18.1% pay increase that the nation’s typical worker saw during that period.
The trend of soaring CEO pay has continued during the coronavirus pandemic, which caused mass economic chaos and job loss among ordinary workers. EPI found that “while millions lost jobs in the first year of the pandemic and suffered real wage declines due to inflation in the second year, CEOs’ realized compensation jumped 30.3% between 2019 and 2021.”
“Typical worker compensation among those who remained employed rose 3.9% over the same time span,” note EPI’s Josh Bivens and Jori Kandra, the authors of the new report.
The findings come amid mounting fears of a global recession triggered by central banks’ attempts to fight inflation via increasingly aggressive interest rate hikes, a strategy aimed at crushing economic demand.
Federal Reserve Chair Jerome Powell, the world’s most powerful central banker, has been forthright about the primary goals of rate hikes: A weaker labor market and lower wages. According to the Fed’s own projections, rate increases could throw around 1.5 million people in the U.S. out of work by the end of next year.
“What we hope to achieve is a period of growth below trend which will cause the labor market to get back into better balance and that will bring wages back down to levels that are more consistent with 2% inflation over time,” Powell said last month.
When Powell voices his desire to “get wages down“—as he did during a May press conference—he’s not referring to the skyrocketing pay of top corporate executives or Wall Street bankers, who have seen their bonuses surge by 1,743% since 1985. As The Lever‘s Matthew Cunningham-Cook reported earlier this year, Powell’s Fed has “declined to implement a law to reduce the skyrocketing paychecks of his former colleagues on Wall Street.”
Bivens and Kandra write in their new analysis that the chief executive pay surge in recent decades is not the “result of a competitive market for talent but rather reflect[s] the power of CEOs to extract concessions.”
In 2021, the CEOs of top U.S. companies raked in nearly 400 times more pay than the typical worker.
“Some observers argue that exorbitant CEO compensation is merely a symbolic issue, with no consequences for the vast majority of workers,” Bivens and Kandra note. “However, the escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1% and top 0.1% incomes, generating widespread inequality.”
To begin reversing out-of-control CEO pay and bolstering wage growth among ordinary workers, EPI recommends “implementing higher marginal income tax rates at the very top,” which “would limit rent-seeking behavior and reduce the incentives for executives to push for such high pay.”
“Another option,” Bivens and Kandra write, “is to set corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation,” an idea proposed by Sen. Bernie Sanders (I-Vt.) in his 2021 Tax Excessive CEO Pay Act.
The bill, which garnered just three co-sponsors in the Senate and 22 in the House, never received a vote.
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