Welcome to the Remix! And thanks for joining our latest spin around the economy. In this column, we look at the latest data on trends in executive compensation. Once again, the 2021 data show that the gap between CEO and worker compensation has grown wider than ever.
For this article, I reviewed a report released earlier this month by the Institute for Policy Studies, a Washington, DC-based nonprofit. This report is the 28th in the Institute’s annual series, called Executive Excess, which began way back in 1994.
This year, IPS examined pay data from 300 large publicly listed firms which had low median wages. Firms included the nation’s largest employers Amazon and Walmart. Low median wage firms were analyzed because 2021 was supposed to be the year in which low-wage workers finally received a raise.
In the data, a couple of themes stand out. One is that wages did rise for some workers, but not all. Indeed, real wages (adjusted for inflation) fell at 106 of the 300 firms analyzed. Meanwhile, CEO compensation at these same firms shot up from $8.1 million to $10.6 million, even as the median annual worker’s earnings at these firms remained a very low $24,000. As a result, CEOs at these 300 firms earned 670 times what the median worker did, up from a ratio of 604-to-one the year before.
Another theme in the IPS report was data on why of the growing gap. And here stock “buy backs” appear prominently. In 2021, stock buybacks totaled a record $881.7 billion. Why does this matter? Well, stock buybacks help boost CEO compensation, often at the expense of the company’s long-term ability to invest in its own operations. A total of 67 of the 106 firms with declining wages bought back stock. At firms such as Best Buy and Target, the money spent on buybacks, if spent instead on their workers, would have been enough to enable every worker to receive a raise of $10,000 a year or more. In short, buybacks are yet one more means to shift compensation from labor to capital. The CEOs of both Best Buy and Target signed onto the Business Roundtable’s 2019 statement expressing their commitment to employees, yet in their daily practice executive earnings are prioritized over their support of their own companies’ workers.
The picture is not pretty, but the data that this article details is important. In reading this, I encourage you to consider how to reverse the long-term trend of ever widening gaps in pay between regular workers and corporate executives.
Until the next Remix column, I remain
Your Remix Man:
Steve Dubb
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