July 7, 2022

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CEOs enjoy huge wages while their workers struggle to pay the bills

CEOs enjoy huge wages while their workers struggle to pay the bills
Typical low wage worker wages Did not keep up with inflation Last year in more than a third of the companies reviewed by the Institute for Policy Studies, a progressive think tank. The IBS survey included the 300 publicly traded companies with the lowest average wages for workers.
Consumer prices rose to a 40-year high above 8% this spring. While many workers saw fatter salaries as a result, few were able to keep up with inflation — a dynamic that frustrates consumers and begins to Overburdened spending.

Meanwhile, executives haven’t felt as much of the inflation.

Salaries for CEOs at the companies mentioned in the report are up 31% — bringing the average pay gap to 670 to 1, from 604 to 1 in 2020.

In other words: CEOs at these companies got a raise of $2.5 million. Low-wage workers got a raise of $3,500. Average CEO earnings are $10.6 million per year. The low-paid worker came home with less than $24,000.

“We haven’t seen any significant progress toward equal pay,” Sarah Anderson, director of the institute’s Global Economy Project, told CNN Business.

When the pandemic broke out in 2020, the researchers wrote, “corporate boards of directors protected far more than CEOs’ bountiful paychecks, even as their workers lost their jobs, income, and lives.” In 2021, the report says, corporate leaders turned to tactics of inflating the salaries of new CEOs, including spending billions on share buybacks and inflating consumer prices to maintain wide profit margins.

Repurchases and price hikes

Last year, companies in the S&P 500 repurchased a record $882 billion of their stock. That number is on track to reach $1 trillion in 2022, according to Goldman Sachs.

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At 106 companies where researchers found average worker wages were not keeping pace with the 2021 inflation rate of 4.7%, 67 were spent on share buybacks, a controversial maneuver that inflates a company’s stock price, and thus executive salaries, juices up. It’s been a thorny issue since its legalization in 1982 – before that, it was considered stock manipulation.

The IPS report specifically called for large retailers to spend huge amounts of money on buybacks while lowering average worker wages.

The White House has proposed new rules aimed at limiting share buybacks as part of its $5.8 trillion budget released in March, but those changes are unlikely to win bipartisan support.

CEO salaries are always top notch, but the widening gap between CEOs and their workers is under increasing scrutiny from progressive lawmakers.

During the pandemic’s first year, chief executives’ payrolls jumped 19% — even as many of their businesses stopped, according to the Economic Policy Institute, which tracks 350 of the largest US companies. The latest EPI report shows that CEOs earned 351 times the average worker’s salaries in 2020.

‘Fundamentally unfair’

Critics say the pay gap isn’t just about bad optics — it’s also bad for business.

“I think most Americans are angry because they see it fundamentally unfair, but there is also a strong argument in business that these extreme gaps demoralize workers,” says Anderson, who co-wrote the IPS report. “When so many companies face recruitment and union challenges, why not look at trying to address these gaps as a way to have more peaceful and productive relationships with their employees?”

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The report urges President Biden to exercise executive authority to roll out new standards for federal contractors that would make it more difficult for companies with huge pay gaps between CEO and worker to obtain lucrative federal contracts.