The wage gap between CEOs of the 350 largest publicly traded U.S. companies and average U.S. workers continues to increase, according to an Economic Policy Institute published in early October.
In 2021, CEOs earned 399 times more than the typical U.S. worker was paid; this is up from 351 times more in 2020. The wage gap was only 20-1 in 1965 and 59-1 in 1989.
This means that CEO pay has increased 1,460% since 1978, compared to an increase of 18.1% for average worker pay.
These figures are based on a realized measure of pay for CEOs, which the report explains “counts stock awards when vested and stock options when cashed in and ownership is taken.”
For worker pay, the report calculated the “average compensation (wages and salaries plus benefits) of a full-time, full-year production or nonsupervisory worker (a group that makes up about 80% of the private-sector workforce).”
The disparities persisted even during the pandemic when non-essential businesses had to be temporarily closed, with CEO pay increasing 30.3% from 2019-2021, compared to a 3.9% increase of workers who remained employed during this period.
Even when only compared to the top 0.1% of wage earners – whose wages have increased 358% since 1978 – CEOs still come out well ahead, receiving 6.88 times more pay than the highest non-CEO wage earners.
Stock awards and stock options are driving the increase in CEO pay, comprising 82% of their total compensation in 2021.
These inequities are not the result of the superior talent or performance of CEOs or due to an increase in business productivity, the report said, but result from the power CEOs wield due to “dysfunctional systems of corporate governance.”
In 1965, CEO pay averaged $995,000 while worker pay averaged $45,200. In 2021, average CEO pay was $27.7 million and average worker pay was $64,100.
“Exorbitant CEO pay is a contributor to rising inequality that we could restrain without doing any damage to the wider economy,” said Josh Bivens, EPI’s director of research and one of the authors of the report, in a press release. We need to enact policy solutions that would both reduce incentives for CEOs to extract economic concessions and limit their ability to do so.”
The full report is available here.
