Hey there. It’s Zach Silk with Civic Action. Every week, I send out a free newsletter called The Pitch (you can read it and subscribe here!). I’m reaching out to Civic Action supporters to give you a chance to read what I recently wrote about inflation. It’s an issue at the top of everyone's minds, but the media rarely presents commonsense takes on what’s behind the problem. Will you give it a read?

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The Pitch: Want to Fight Inflation? Let’s Cut CEO Pay

The best indicator of how our economy is doing isn’t GDP or the stock market – it’s the economic health of working Americans. When paychecks grow and working- and middle-class people have more money in their pockets, they spend that money, and their growing consumer demand creates new jobs. When people lose jobs and income, that consumer demand dries up, and more people lose their jobs in a vicious cycle.

Part of the reason why the economy has been so strong over the last year despite inflation is the fact that the labor market has been tight and wages have been growing. But the Federal Reserve mistakenly believes that your paychecks – not a broken supply chain and corporate price-gouging – are the reason why prices are skyrocketing, because that’s the way they’ve always viewed inflation. They’re explicitly targeting job growth and wage growth in an attempt to cool the economy down, and they’re being crystal clear that they will continue to raise rates for the foreseeable future. Let me be crystal clear – this 1970s approach kills jobs.

There’s now evidence that the Fed might finally be succeeding in their economic self-sabotage. Sydney Ember and Ben Casselman of The New York Times write:

Americans in July quit their jobs at the lowest rate in more than a year, a sign that the period of rapid job switching, sometimes called the Great Resignation, may be nearing its end. Wage growth, which soared as companies competed for workers, has also slowed, particularly in industries like dining and travel where the job market was particularly hot last year.

To be clear, the labor market is still very strong, but for the first time in a couple years, the arrows are pointing in the wrong direction: Layoffs are up slightly, and job openings are declining slightly. And the Washington Center for Equitable Growth shows that these small declines are basically showing up across all industries.

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But there’s one job title in particular that’s been defying gravity for decades – the one job in the country that is not concerned about wage growth at all. I’m talking, of course, about CEOs. A new study from EPI shows that in 2021, CEOs were paid 399 times the pay of the average worker, and those numbers have skyrocketed since 1990, with another huge bump in the last two years. This chart showing CEO-to-worker pay is breathtaking:

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Graph showing increases in CEO-to-worker compensation ratio from 1965-2021

I can assure you that no American CEO works 399 times harder than their average employee. This isn’t the free market allocating value efficiently, as we were taught in our Econ 101 classes. This is a profession that is leveraging 40 years of trickle-down deregulation and wage suppression to its own benefit. CEOs are diverting corporate profit created by workers away from innovation, improving productivity and boosting workers’ wages to their own bank accounts – and every one of those dollars is a dollar sucked out of the economy.

The Fed has spent a lot of time recently claiming that millions of Americans need to lose their jobs and accept lower paychecks to decrease inflation. But not once has it suggested that CEO paychecks are too high, or that increased corporate executive compensation is driving inflation.

Thanks for reading my latest essay. I hope you enjoyed it. If you want to read more from Civic Action, you can follow this link to find an archive of my weekly newsletters and subscribe to receive my next economic update. – Zach Silk

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