Authored by Jesse Colombo via Forbes.com,
MarketWatch recently published a piece about the soaring U.S. CEO-to-worker pay ratio, which hit 278-to-1 in 2018 (up from just 58-to-1 in 1989 and 20-to-1 in 1965) –
Nice work if you can get it.
CEO pay has increased 1,008% between 1978 and 2018, while typical worker pay has edged up 12%.
That’s according to analysis from the left-leaning Economic Policy Institute, providing new data on the depth of income inequality.
In 2018, CEOs in the country’s top 350 businesses were paid $17.2 million on average. Employees working in those industries — ranging from retail to technology and manufacturing — typically earned $64,500, researchers said.
Overall, there’s a 278-to-1 pay ratio between workers and CEOs. In 1989, the compensation ratio was 58-to-1 and in 1965, it was 20-to-1.
Stock awards and cashed-in stock options averaged $7.5 million of CEO pay in 2017 and 2018, the study added.
Incorporating stock in pay arrangements is one way to incentivize CEO, and rising salaries illustrate the market for talent in the C-suite, some observers say.
Left-leaning economists, politicians, and other commentators frequently use the soaring CEO-to-worker pay ratio as an example of why capitalism is inherently flawed and always leads to the rich getting richer, but my research has found that it is a byproduct of central banking and fiat (i.e., “paper”) currency rather than capitalism. To make a long story short, the Federal Reserve has excessively inflated the financial markets in its attempt to create an economic recovery from the Great Recession. This excessive asset price inflation has pushed U.S. household wealth far out of line with its historic relationship to the GDP, as the chart below shows. The wealthy have been the greatest beneficiaries of this asset price inflation because they own a disproportionate share of the assets that have been inflated by the Fed, which are stocks, bonds, and high-end real estate.
U.S. Household Net Worth As Percent Of GDP
The Fed’s inflation of the U.S. stock market is the primary reason why the CEO-to-worker pay ratio has increased so much. The CEOs of public corporations usually receive stock options as part of their compensation packages, which means that they can benefit greatly when their stock prices rise. As the chart below shows, the CEO-to-worker pay ratio surges during asset bubbles, but falls back down when the bubbles burst (it correlates with the chart above). The current asset bubble is no different and the excesses will be corrected in the form of a strong bear market, just like they always are.
CEO To Worker Pay Ratio
To summarize, it’s not fair to blame the free market or capitalism for market distortions created by central banks like the Fed. Any person or organization that is genuinely interested in finding solutions to our society’s problems should keep an open mind regarding all possible explanations about what is causing those problems. If you are interested in learning more about this topic, please read my detailed recent report called “The Truth About U.S. Inequality.”
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Henry Ford CREATED a market which had not existed when he paid his employees $5.00 per day when the average wage of the day was around $1.25 per day.
His premise was not entirely altruistic as assembly line work was monotonous; a way had to be found to retain employees, as well.
Of course, the wall street types and the banksters howled that Ford’s wage rates would destroy capitalism (as they knew it-those at the top reap all of the benefits while the proles are forced to live on a bare subsistence wage, due to the machinations of those at the top).
Guess what??
The OPPOSITE happened. Henry Ford knew one of the basic tenets of a truly free, capitalistic society, that a well-paid work force would be able to participate and contribute to a strong economy, unlike what is taught in business schools today-that wages must be kept to a bare minimum and that the stockholder is king. Our free trade politicians have assisted the greedy wall street types and banksters in depressing wages on the promise of cheap foreign labor and products.
A good example of this is the negative criticism from financial types that Costco receives for paying its employees well above market wages. These same wall street types praise Wal-Mart for paying its employees barely subsistence wages while assisting them in filling out their public assistance (welfare) forms.
Any sane person KNOWS that in order for capitalism to work, employees need to make an adequate wage. Unfortunately, this premise does not exist in today’s business climate.
Henry Ford openly criticized those of the “tribe” for manipulating wall street and banksters to their own advantage, and was roundly (and unjustly) criticized for pointing out the TRUTH.
Catholic priest, Father Coughlin did the same thing and was punished by the Catholic church, despite his popularity and exposing the TRUTH of the American economy and the outsider internationalists that ran it . . . and STILL run it.
Our race to the bottom will not be without consequences. A great realignment is necessary (and is coming) . .
Henry Ford bought himself some damned good PR by paying his employees well, and he had enough market share to easily be able to do it. The idea that he created his own market of car buyers because of Ford’s pay rate is obvious innumerate nonsense, since his universe of car buyers was vastly larger than his total number of employees. Creating customers by paying your workers enough to buy the product is perpetual-motion-machine thinking. That being said, there is some truth to the idea that a thriving free market economy requires that workers earn an adequate wage. What workers want – and even what society writ large would like workers to earn – may be at odds with what the global market will bear.
CEO pay vs average worker pay is worth considering, but when considering whether reduced CEO pay would meaningfully allow higher worker pay, it leaves out the relative number of CEO’s vs workers. A better generalized metric would be CEO pay as a percentage of business revenue.
Lawrence Culp, CEO of GE, has a 21 million dollar/year annual pay package. GE has 283,000 employees. If his pay were split among the employees, they’d each get $74. Of course, his ultimate compensation will depend a lot more on how GE stock does. He’ll likely make a lot more than $21mil/ year.
I see you have bought into the flawed ideas that the “stockholder is king” and that paying employees “the lowest wage possible” is “good business.
I’ve got news for you, pal. Despite the “fluff” coming out of the business schools, that “ain’t the way it is” in the real world.
It wasn’t only “PR” as you state, but the “economies of scale”, something most economists never understand. In those days, automobiles were seen as “playthings for the rich”–nothing more.
Ford turned that concept on its head, making automobiles AFFORDABLE. In fact, the price of Ford’s automobiles was constantly decreasing, from an original price of around $450.00 to around $250.00, despite the same amount of materials being used in assembly and rising Ford worker wages.
Ford himself stated that he wanted the “common man to enjoy the fruits of his labor”, something you would NEVER hear from any economist or bankster, even today.
He paid more mostly in order to get and retain employees:
“At the time, workers could count on about $2.25 per day, for which they worked nine-hour shifts. It was pretty good money in those days, but the toll was too much for many to bear. Ford’s turnover rate was very high. In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped and production of cars halted. The increased cost and delayed production kept Ford from selling his cars at the low price he wanted. Drastic measures were necessary if he was to keep up this production.”
And so he raise wages. Hiring 52,000 people a year to keep 14,000 was not an option.
Bingo. I have been dealing with this for years in the southeast. Turnover kills productivity and efficiency. Low wages brings idiots, and idiots, well they just find ways to fuck up things that you can never dream about.
Pay well, but only for above average work. And fire the idiots as soon as they show they are an idiot.
Iska said or implied no such things. Attributing that to Iska based on zero is dishonest. although I do suspect he might agree with the stockholder bit to a certain extent.
Market competition is the biggest driver of wages, as it should be. And that is in fact the way it is in the real world. Lowest possible wage is often not good business, as you then get the lowest quality of employee as a result. Lowest possible wage such that you attract and retain the best quality employee/most suitable employee is really what you are after.
Re your Henry Ford quote – bullshit. I challenge you to post a source for that. I searched and found no such quote anywhere. I suspect once again you are lying. I will retract if you can post a reliable source.
Re falling prices, it was because of steady improvements and increased efficiency of manufacturing processes. Higher wages stabilized the workforce, meeting market demand.
Once again Llpoh, our resident jew or hasbarist questions what I have stated. Ford’s “quote” is actually audio which was recorded.
You accusation of me “lying” is but another on of your jewish tactics to discredit a “goy”. The jew wall street types HATED Ford, because he DARED to go against the banksters and made no bones about it. He KNEW what and who ran wall street and published his findings in “The International Jew” and the “Dearborn Independent.
Shalom, Llpoh…
I see you have no source. What a fucking surprise. Not. Of course there is no source, as you are once again lying. You lie about everything. You lie about what people say, or mean, with the shit about Iska being the most recent instance. Every damn thing you say is a lie.
So, why do you not just admit it – there is no source material for the Ford “quote”. You just made it up.
BTW – I do not hate Ford. He was a man of his time, and revolutionized manufacturing. However, he entirely recanted and apologized for his positions re Jews, and denied any knowledge of what was in The Independent. You could learn a thing or two. Here is an excerpt from his apology and recantation:
“For some time past I have given consideration to the series of articles concerning Jews which since 1920 have appeared in The Dearborn Independent. Some of them have been reprinted in pamphlet form under the title “The International Jew.” Although both publications are my property, it goes without saying that in the multitude of my activities it has been impossible for me to devote personal attention to their management or to keep informed as to their contents. It has therefore inevitably followed that the conduct and policies of these publications had to be delegated to men whom I placed in charge of them and upon whom I relied implicitly….
Those who know me can bear witness that it is not in my nature to inflict insult upon and to occasion pain to anybody, and that it has been my effort to free myself from prejudice. Because of that I frankly confess that I have been greatly shocked as a result of my study and examination of the files of The Dearborn Independent and of the pamphlets entitled “The International Jew.” I deem it to be my duty as an honorable man to make amends for the wrong done to the Jews as fellow-men and brothers, by asking their forgiveness for the harm that I have unintentionally committed, by retracting so far as lies within my power the offensive charges laid at their door by these publications, and by giving them the unqualified assurance that henceforth they may look to me for friendship and goodwill…
It is needless to add that the pamphlets which have been distributed throughout the country and in foreign lands will be withdrawn from circulation, that in every way possible I will make it known that they have my unqualified disapproval, and that henceforth The Dearborn Independent will be conducted under such auspices that articles reflecting upon the Jews will never again appear in its columns.”
At least you did not pull the old “he paid them so they could buy his cars” bullshit, which you did recently, and which I jammed back up your ass with the facts.
Amazing how you lie at every turn. Every. Damn. Time.
Reads like a present day forced retraction for calling a dyke a bulldyke or a tranny a crossdressing queer.
A man that smart and wealthy with no foreknowledge of pamphlets being distributed all over and never say a copy of his own Dearborn Independent.
I don’t know which of you is right but that statement smells of forced confession.
Flea – no doubt. He certainly came uder a lot of flack for the publications under his ownership. He claimed he was not aware of the content. Sounds unlikely. But that was his claim, and he apologized in public.
But it is an actual source document, signed by Ford himself. And what does anarchyst have? Nothing whatsoever. Every. Damn. Time.
He can never put forth a source for his material. Never. He says so and so says such and such, and every damn time it is false.
If I say something, I can almost always lay my hands on the documents to back it up.
I am sick of the lies to back the narrative.
I think the realignment you speak of is white genocide and replace with low IQ shit from the rest of the world.
Carry on.
CEO’s get paid so much (when they do) because corporate boards think (rightly or wrongly) that it’s a good investment in terms of the stock price going up. If there’s a problem – and there probably is – it’s that it’s deemed reasonable to buy the stock of a company that makes no money and – in some cases – has no foreseeable prospect of making money. Regular people have been talked out of saving and talked into “investing”, which mostly means gambling. It works fine until it doesn’t.
I agree – cronyism.
When you look at the math, this executive compensation complaint doesn’t hold water. Supposed we completely eliminate the compensation:
Walmart’s top five executives earned $68.73 million last year.
Walmart has 1,400,000 employes.
$68,730,000 / 1,400,000 = $49 per employee.
Of course it is cronyism.
Work. How best?
1. For a corporation.
2. For a small, privately owned.
3. Self employed.
4. Retired, with pension, benefits.
5. Deadbeat, mooch.
6. Government job.
Skills and work history factor in.
Of the above, I prefer #3, if possible, as ideal, if unable or unwilling to retire.
Next, #2 has to me, proven more advantageous than #1.
Small biz owners usually treat good employees very well.
Corporations: all about bottom line, + executives and share owners are prioritized over workers.
Although offering some security and juicy benefits, corps will take advantage of workers at times.
“Golden handcuffs” is what keeps unhappy workers in corporate jobs they hate. Dependent on the juicy income & work security.
But in the end, there’s always an exit door.
If we don’t see how or when to use the exit option, then we need only look in the mirror and realize we haven’t planned as well as we should have, by establishing options.
#5 is to be avoided. Those types are part of the problem.
#6 group members are usually
despised, because they don’t produce enough that benefits the people funding their growing, bloated ranks, via taxation.
No ability for non members to opt out of the demand to help fund a growing government that has no accountability to run lean or efficiently.
Corruption runs rampant.
Having a side business / income stream seems prudent, if at all possible.
CEOs and high ratio compensation compared to workers?
A rigged game.
A small club, and most of us aren’t in it.
Awareness of it does explain why so many are attracted to tax the rich and socialist demands for freebies.
Too many willing hard workers are getting destroyed.
They see the greed at the top, and are calling for change, threatened with extinction.
We haven’t had Capitalism in a long time, if ever. We have Crapitalism. A phrase coined by Gene Epstein of Barons Weekly to describe Crony Capitalism.
Today’s version is closer to Feudalism. The children of Actors, singers, athletes etc.. It’s likely a basic instinct to pass it on to your kids but at some point the extremes bring collapse or revolution.