There have been numerous ideas on how to boost our sluggish economy. The most recent idea has been austerity, or cutting back on government-funded programs. A 2010 study promoting austerity was recently debunked by a Harvard graduate student, thanks to him spotting “Microsoft Excel” errors. Slashing government programs will not create growth. Slashing CEO pay, however, will. The average CEO is paid over 350 times the amount of an average worker. This, combined with stagnant wages and inflation, is a big reason why the average Joe is finding it more difficult to make ends meet.
According to information from AFL-CIO, the average CEO was paid 42 times the salary of the average worker in 1982. Now, it has ballooned to over 350 times. While the average worker makes $20 per hour—according to the Bureau of Labor Statistics—the average CEO’s salary is $12.3 million a year, or about $7,000 per hour. That’s the AVERAGE amount. This number includes salaries, bonuses, perks, stock awards, stock options, and other incentives. Eric Schmidt, the former CEO of Google, made $101 million in 2012. ($100 million of it was an equity award offered by Google.) That breaks down to about $809 per minute, or $48,548 per hour. The average worker made about $35,204 the entire year in 2012. If someone can justify how a person can make more in an hour than what the average Joe makes in an entire year, I’d love to hear the argument. (You’ll be happy to know that, after stepping down as CEO, Schmidt’s salary now is just $1.25 million.)
Most people would agree that the CEO deserves a higher salary than the average worker, but 350 times is not a popular or even healthy number. The US far and away has the highest executive pay in the world, both in absolute numbers and in the ratio (354:1) to workers’ average wage. The average CEO in Canada gets paid 204 times the average worker. In England, the ratio is just 84:1, and Japan’s CEOs get paid an average of 67 times its average workers’ pay. The US, Canada, and England all currently have national unemployment rates between 7 and 8 percent, while Japan’s last measured unemployment rate (September 2012) was only 4.2 percent. Why the huge gap between American CEOs and global CEOs’ salaries?
And why are the average worker’s wages stagnant? According to the Bureau of Labor Statistics, productivity has increased 82 percent since 1992, but income has only increased 10 percent in the same time period. The federal minimum wage sits at $7.25, an amount that has not increased since 2009. We constantly say we’re the best country in the world, but Australia’s minimum wage is twice ours (equivalent to $16.45 per hour). Why doesn’t America have the best worker wages? General prices of goods and services go up in varying increments every year, but only a handful of states accordingly adjust their minimum wages. Furthermore, many Americans making two or three times the minimum wage are having trouble affording basic needs. Eighty million—nearly half of all working-age adults in the US—did not go to the doctor last year, one-fourth of all working-age adults did not fill an expensive prescription or skipped recommended tests, and one-fourth of working-age adults with good insurance had to forgo treatment. Forty-seven million Americans are on food stamps, and it isn’t because they’re all lazy. About one-third of Americans are obese, and a lot of it has to do with the fact that people cannot afford healthy produce and are relegated to buying fast food loaded with sugar and corn. In a recent study of 25 major US cities, only the average household of Washington, DC, could afford to buy a new car.
The average American’s wages have increased just 10 percent in the past 20 years. During the same time, the average CEO’s salary has increased from 42 times our salary to 354 times our salary. Americans are overworked and underpaid, and CEOs are neither. Not much can be done to rectify this situation, other than shame. The corporate world lies in a bubble, and people on the outside need to be aware of this problem. Why are people who play with money for a living making more and also incurring less risk than people who do physical labor every day? The stock market recently plummeted after fake information on Twitter about a made-up attack on the White House. Why is this kind of information being used in the stock market? Calling out companies who give their executives six-figure bonuses, while subsequently outsourcing jobs, is not solely the job of late-night satirical news programs. The increasing wage gap between CEOs and average Joes hurts our economy, and something needs to be done so our recent recession does not repeat itself or deepen into a depression!
He played clarinet for the Marching Tar Heels in 2005 and 2006. He also volunteered for STV, the student-run television station at UNC-Chapel Hill, in the spring of 2010. He shot video, wrote scripts, and acted for “Off the Cuff,” UNC’s longest running sketch comedy show. He has the rare distinction of having lived in a dorm all four years of his undergraduate college career. He was also on Franklin Street on the night of April 4, 2009. His future plans are to pursue a master’s degree in journalism and to one day work for the media as a sports journalist or broadcaster.
Being one of eight children, David realizes finance is an important topic to everyone, regardless of his/her knowledge of the subject. His interests are in personal finance, budgeting, and savings.
In his spare time, David enjoys watching sports and standup comedy, as well as doing crossword puzzles and writing in the first person. He also thoroughly enjoys trivia and, one day, hopes to participate on the game show Jeopardy!, where he will try to break Ken Jennings’ 74-game win streak.