Last month, economic advisor to The Executive Connection, Warren Hogan, claimed that “low wage growth story has become a macroeconomic phenomena around the world” and told workers not to expect any material pay rises.
Today, it has been revealed that top executives at large US companies are paid 278 times more than their workers, with the pay gap widening, and this is harming the economy:
Average CEO compensation at the 350 largest US firms in 2018 was $17.2 million a year, including stock options, which generally account for two-thirds of their pay packages, according to a study by the Economic Policy Institute.
The gap between CEO and workers has soared from 58-to-1 in 1989 and 20-to-1 in 1965, according to EPI, a nonpartisan think tank that focuses on issues facing low- and middle-income workers.
From 1978 to 2018, CEO compensation has increased by more than 1,000 per cent – with increasingly rich stock awards – while worker pay has risen just under 12 per cent.
“This escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1.0 per cent and top 0.1 per cent incomes, leaving less of the fruits of economic growth for ordinary workers and widening the gap between very high earners and the bottom 90%,” the study said.
“The economy would suffer no harm if CEOs were paid less (or taxed more).”
And the study said the pay inflation “does not reflect rising value of skills, but rather CEOs’ use of their power to set their own pay. And this growing power at the top has been driving the growth of inequality in our country.”
The same shenanigans are taking place in Australia. Real employee compensation is falling, despite rising labour productivity:
And Australia’s national income is flowing to businesses, not workers:
Average CEO pay packets in the top 100 companies has surpassed $5 million, according to research from The Australia Institute:
Furthermore, the latest CEO pay report from the Australian Council of Superannuation Investors showed that CEO pay deals have surge to highest level in 17 years thanks to “persistent and increasing” bonuses:
It is doing economic harm as wider demand is drained and deflation sets in.