US bosses now earn 312 times the average worker's wage, figures show (2018)

It possibly has, at least at an effective rate (by not raising salaries while inflation increases, for example).

The CEO, though, is just one person and it's easy to pay a single person a lot of money.

In a company of 100,000 people, an extra $5,000,000 would only increase their salaries by 50 each; but, it could all go to the CEO and look gigantic.

That's the trillion dollar question. Preferential attachment (winner-takes-all) seems something like a natural law. The pink elephant in the living room, which no one dares mention for fear of catching the attention of the elephant.

Because CEOs aren't a commodity. As the board, you don't want a CEO for the cheapest price, you want the best CEO you can get your hands on. That's the same reason why athletes/actors are paid millions despite literally billions of other people willing to take the job for less.

> And why doesn't the added competition from the billions of extra population from which CEOs are drawn push salaries down?

For that matter, the larger the company, the more viable CEO replacements exist among middle and upper management.

Because CEO recruiting is insanely irrational.

https://press.princeton.edu/books/paperback/9780691120393/se...

4.1 - Glut of labor, but combined with outsourcing to lower cost of living nations/cities/etc.

Neoliberalism (and original neoconservative movement) was started by Jimmy Carter.

https://zacharytoillion.medium.com/how-neoliberalism-destroy...

They said the former, you’re saying the latter.

No, he is just making a hypothesis that could explain the observation, and he is suggesting a way to test them.

As in... science.

What we should do about it (if there is something we should do) is politics, an entirely different topic.

My post was meant to be factual rather than advocating specific policy positions.

It's important to consider absolute quality of life in addition to inequality. "Equality" is a relative measure, but what matters in the end is how well each individual is doing.

I'm in favor of policies that would help the less fortunate, though we need to be careful to implement them in an effective way.

I do think manufacturing will shift from globalization to localization once enough of the process can be automated. Once shipping costs start to exceed production costs, manufacturing will move back home. Of course, if the manufacturing is automated, it means those jobs aren't coming back. This also depends on whether it's cheaper to ship the raw materials vs the finished product, and where those materials can be sourced from.

That being said, a lot of the recent rise in inequality has been driven by government policy. Some things like housing are becoming prohibitively expensive to most due to short term focused policy by the Fed and perhaps congress as well.

The policy reaction we've seen has been quite effective, but is creating many potential asset bubbles that can cause bigger problems down the line.

These bubbles obviously inflate the wealth of the rich and lead to much greater inequality (often described as the k shaped recovery).

Hyper targeted policy, and letting things reach equilibrium through mostly free market forces often produces healthier outcomes in the long run.

Right, the military leadership is underpaid. Not winning a war stinks. Why risk it on second tier leaders because the first tier hit the private sector?

Yes, Disney is very large but CEO pay isn't proportional to employee count. If Elon Musk's compensation (almost $600m in 2019) was divided amongst Tesla's 70,000 employees, that would be ~$8,500/employee. If Sumit Singh's compensation (~$108m in 2019) was distributed amongst Chewy.com's employees (9,800 in 2019), it would be ~$11,000/employee.

No one thinks bringing CEO pay back to Earth will solve poverty by itself.

yah, seems like the premise is flawed, same like how countries are compared to each other regardless of their respective sizes.

>How is this a counterpoint? It's just a couple numbers thrown around to fan the flames. There is no effort to analyze the numbers, and deliberate effort in the opposite direction

As opposed to the garbage PG pulled out of his ass for his blog?

Also comparing CEO pay with hourly part time pay is completely on-point, as CEO's famously do very little work unless you count networking at the golf course as billable hours.

As someone here said just days ago 'Jesus Christ himself isn't worth 500x' I would add especially since the low wage hourly workers are almost always the ones making the actual money for the business.

[I assume you mean "for-profit" rather than "private". These companies aren't generally private and neither is their money, but...]

Exactly?!

People in this thread and elsewhere say this is inevitable because of "globalization" or "automation" or "increasing scale of operations" or "increasing concentration of authority" or similar things that apply equally to the US military.

The actual reason for this compensation disparity, which exists in large for-profit companies, and doesn't exist in one of the biggest organizations on earth, measured by budget, is capitalism and the market. The fact that the US military is not a for-profit company is the point.

If you view this disparity as a bad thing, then you have to accept that the corollary: you might, just maybe, have a problem with free market capitalism. Welcome to the club! :)

I am paying in the area of 40-45% in the UK. I talked with someone from the US about this and they said they pay similar in the US. I checked for New York and got 37% which is quite in the ballpark. Is it much different in other states?

Incorporate yourself and have your salary be paid as management fees to the corporation. Declare those fees as a capital gain and pay 15% tax. Or, have the corporation housed in a tax haven, pay almost nothing in taxes.

Setup a foundation, use that foundation to employ friends or relatives (like say, your wife). Pay out very little in charity but take your donations to the foundation as a tax write off. Etc.

yeah look up Moffett federal airfield

NASA/Air Force was decommissioning the hangar at the base, and Google happens to be their next door neighbor. They rented to hangar to Google, and Google used it to park their corporate jet (and maybe a few private jets of some pre-IPO employees).

It was actually a good thing, it brought money in for NASA.

When you hear "CEO" most people think of Steve Jobs, Bill Gates - famous CEOs that are the face of their company. The vast VAST majority are not famous nor even the face of the company.

That's taking total productivity and dividing it by workers and then calling it "worker productivity".

What's pertinent is whether increases in productivity are directly attributable to the workers in the denominator, or whether there are other reasons for that growth. Furthermore the denominator in that graph is not actually the total workers involved in the productive output of an economy... for example, the billions of workers added to the work force but who work in developing countries for slave wages aren't factored in to the denominator of total workers, but their output does contribute to the numerator.

Zuckerberg and Bezos aren't receiving new equity grants either.

He never made $13B in a day. It's just a stock price fluctuation that can be given back tomorrow. He doesn't get to spend it.

And even if you count stock fluctuations as income, he never earned it in one day, he earned it over 25 years of work.

The value of Amazon is based on their labour force and their willingness to work under the conditions they do for the pay they get.

If you give all of them 22k, a lot of them will use that money to jump ship. The value of Amazon will go down.

The value of a corporation is the _willingness of their staff to cooperate_. For low skill workers, higher pay can enable them to work their way up to higher skill jobs, which reduces their willingness to cooperate at the low wage job, which reduces the value of the cooperation.

I feel like I just earned a nobel price in economics, but I guess a real economist will quickly put holes in my epic bubble^^

this focus on the value of his stocks, and their fluctuations, is silly.

not only could he not liquidate all of his holdings in under a few years without killing the stock price (and making the later sales worth less), but part of the value of amazon is bezos' oversight. if he dumps all his stock, the public elects a new board, which elects a new chairman, and they pick some new CEO, amazon wouldn't be worth as much as it is now.

(also he'd bleed away a chunk of whatever he sold off in capital gains taxes. his cost basis is presumably somewhere near $0, since he founded the company and has held from the start.)

No, but paying a CEO more might allow you to hire a better (more productive) one.

you've got it backwards. probably because it sounds more dramatic.

of course paying someone more doesn't make them more valuable, in the same way paying extra for lunch doesn't make it a better lunch.

rather, they're valuable to you, so you pay them more. in the same way that lunch at the high end restaurant costs more.

perhaps the best CEOs, with their wealth of connections, aren't worth the additional cost. (like an overpriced restaurant.) interestingly, that's an investable thesis! you could go invest in companies with the cheapest CEOs. i look forward to hearing about your returns!

>There's this silly idea that if you pay the same CEO 10x more, they suddenly become 10x as valuable to the company.

No one actually believes that. The problem is that if you don't pay a capable CEO 10x more, they are gonna leave elsewhere where they can get paid 10x more. And the only people to replace them who wouldn't be asking for the same amount of compensation are not the kind of people you would want to be your CEO.

As others have said, CEOs aren't a commodity, just like top tier athletes and actors aren't. LeBron gets paid multiples of what his teammates make [0]. Most of his teammates on LA Lakers earn single digit low millions (with the average being even lower), while he made $39mil from his contract last year. Is he providing 10 times the value to the game that his teammates making under $3mil/yr do? I doubt it. But if you want LeBron, you gotta pay it up, because there isn't a lack of other teams out there who would be more than happy to pay him as much.

0. https://www.basketball-reference.com/contracts/LAL.html

If you were a CEO and your board & investors thought you were worth $50M a year, presumably you would decline that out of selflessness and insist upon a much more reasonable living wage?

Not really no...Companies typically don't want to lose their CEOs so with the accounting change they are incentivized to give out larger and larger stock comps.

Combine that with the rocketship of the market these past 20 years....

It doesn't work this way. Unless you have a union or some large economic event, people will make resignation decisions independently. This means that the number of resignations on a typical day will follow a normal distribution a.k.a. bell curve. Say, you have 3650 employees with an average tenure of 1 year. It means that on 90% of the days you will have between 0 and 10 resignations, averaging at 1 per day. You also know that out of 10 applications, 1 leads to a hire, so you have an HR team with a target of reviewing 10 applications per day and hiring 10% of them. Due to scaling, you can redistribute the same amount of work between 3650, 3550 or 3750 employees without any difference in output.

If a single employee comes demanding a raise, they have 0 leverage over you. If you fire them, you will have 3659 employees for a day or two (until more candidates get hired) with your business designed to handle fluctuations between 3660 and 3750. It costs you zero, literally ZERO.

High turnover for low-wage jobs actually makes it better for the business. It's like if you already have a leaky basement with a sump pump in place, you won't even notice if you spill a single bucket of water there.

For a smaller business of 10 employees, replacing one could be harder. Sharing their workload over 9 people is harder. The owner will have to spend their own time searching for a replacement, remembering the things that the departed person knew and trying to teach them to the replacement, etc. That's why smaller companies treat people better.

As for the CEO, you can find people willing to do the job, but there's a big difference between willing and being able to. The main role of CEO besides giving a good public image is to keep the internal corruption and infighting at a level where it doesn't kill the company's business. Despite the fake smiles and positivity, it's a pretty dirty backstabbing environment and you need to know certain unwritten rules to play that game.