CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

This kind of splitting indicates two potential things here and only one of them is concerning/needs addressing. First of all, the wages could be splitting because the labor market characteristics of the two jobs changed. This is completely reasonable given the increased foreign competition faced by the lower 3/4 or so of the labor force, as well as the increasing immigration pushing labor prices down for that labor cohort. The second thing that could be going on, and is concerning, is ceo board capture being abused to increase compensation beyond a competitive ceo wage. This is also believable because most of these big companies have no single large shareholder to push back on ridiculous wage proposals and the mechanics of how voting the shares works means management suggestion is very likely to be approved so the board is often at the whim of the CEO far more than they should be. Only this second cause needs some action to resolve (although I don't have a good recommendation on what that action would be).

From a job complexity standpoint, CEO jobs are more challenging than bankers since they have to manage a real business to generate a positive return. Bankers have no skin in the game and yet make millions.

I'd like to talk about Josh Bivens in general, this article appears to be a continuation of a similar one done in 2019: https://www.epi.org/publication/reining-in-ceo-compensation-..., and another one from 2013: https://www.epi.org/publication/pay-corporate-executives-fin..., yet another in 2011: https://www.epi.org/publication/ceo-ratio-average-worker/

I find it interesting that the key numbers rarely change, beginning years are deliberately used (1978), even though there is nothing really significant about 1978 in particular for economic terms. But why keep using that as the same starting year through so many articles through the years?

It also appears that Josh Bivens is Keynesian in beliefs. Previous articles support this beginning from ~2009 onwards, and becoming more apparent through to the 2012 US Presidential election. Bivens has rather strong support for Occupy Wall Street, numerous articles stating as much.

In the post-war period prior to the 70s, it was (more) common and reasonable for a high school educated factory worker (in the US) to have optimism in their ability to work in that role and improve their state of affairs. Afford to buy a home, pay off the mortgage, buy a car, provide for a couple of kids, send one of them to college, drive to a national park for an annual vacation.

Nowadays, one can be both lucky in terms of their upbringing and be highly educated (post secondary or even advanced degrees), and yet very easily find themselves in a position where the above "life staples" (house, car, family without poverty) are meaningfully out of reach. And in many cases, not even conceivably within reach.

It's not merely that housing in major cities is objectively less affordable, it's that the stage upon which life is lived has changed in it's nature. It's a perpetual sunset rather than sunrise, optimism is either for suckers or for those who mischaracterize a certain degree of background luck as merit.

I'm in the lucky category. But I think when we boil down the collective subjective experience of hundreds of millions (billions?) to broad metrics and indicators, our models lose the fidelity they need for the subjects to feel they are being taken seriously. I understand why we have these models and tools for better navigating the civilizational state-space, but they're obviously imperfect, and they're of little comfort when serious concerns go unacknowledged (let alone unaddressed) for decades.

Now it's possible that CEO pay is orthogonal to all of this. Perhaps as a measure it's one of the metrics that loses too much descriptive power in it's generalization... but it certainly does reek of something.

I ignore every article that separates the top 1% from ordinary workers.

In the UK, to be in the top 1% of earners you need to earn 120K GBP gross a year, or 74K net. Don't tell me you are anything other than an ordinary worker with that. As a side note, you will also earn less net than a household of two earning 50K gross each, are they also not ordinary workers?

I don't give a single fuck about the salary of the 0.0001% of the population that is billionaire CEO, that's not the problem. The problem is that basic necessities have been turned into a profit-printing machine and you pay 2K a month for a 500 square feet apartment in London.

There’s a similar phenomenon with authors, actors, and musicians. A-list actors command an order of magnitude more in compensation over B-list because they have concentrated a much stronger hold over an audience.

This isn’t only true of “celebrity” CEOs like Jobs, Musk, etc. CEOs can develop their own mini fiefdoms of celebrity within a niche industry. This network and power gives them access to opportunities that can be pivotal to the success of a company.

I think in order to equalize exec pay, you’d need to figure out how to stop the bandwagoning that consolidates exec power.

Largest company in 1978 was GM they did about 53b in revenue, and 4b in gross profit.

Largest company in 2022 is Apple they did 400b in revenue and 170b in gross profit.

The list of people that can run and manage Apple is one, Tim Cook. The list of people that can work at Apple is millions.

/s

I believe every job ad should have a minimum salary listed with other compensation and benefits.

Sure, there's debate about pro's and con's of corporate consolidation and market failures surrounding monopolies and oligopolies. But, with the increase in connectivity between regions via telecom, internet, mobile, etc; wouldn't there be an expectation of increased economies of scale from more frictionless communication?

If we note increased economies from scale for companies, it would naturally follow a CEO's wage would rise given the weight CEO's decisions when compared to results of company and number of workers affected. The CEO of walmart vs the CEO of 5 general stores would obviously change.

All I'm noting is that perhaps this is downstream of consolidation and that's the pertinent discussion, not deciding on socialism/revolution.

That is, the growth of markets in the past 35 years means that people at the top in "winner take all" markets are able to take a lot more from the bigger pie they command.

I'm not saying this is fair or good for society, but I think comparing to things like sports stars would shine a better light on the dynamics that allow all of those at the top to rake in disproportionately more money.

If we could harvest energy from the hardcore early capitalist theorists rolling in their graves we'd have infinite energy at that point

And who are the shareholders? The wealthiest 10% own almost 90% of stocks.

This is all recorded.

Later, CEOs invest large chunks of their salaries in the 'hedge fund'.

Evidence never quite leaks, as the 'hedge fund' has quite a few customers in various public offices.

Oh, never mind. Too far-fetched. Couldn't be happening. Right in front of everyone. Now.

If you want to see how people's well-being has evolved, you have to make somewhat more intelligent comparisons: for example by looking at what people can afford today compared to 50 years ago, or through quality of life indexes. The only thing that has changed for the worse seems to me to be the cost of real estate in the big cities, because of an obvious concentration of the population in them and not because the 1 percent of the population has bought everything.

But outraged people will always find something to be outraged about.

This is the key to their high compensations, and in some ways it has to be like that because how else are you going to incentivize a CEO to raise the value of the company? Say a CEO was paid exactly what the engineers at a company were paid, it doesn't matter to him if the stock goes up or down because his pay stays the same. By tying the CEO's salary to the stock price, you're telling them that they can make a killing if the company makes a killing.

It's unfair but it's necessary.