It is increasingly apparent that, when left to their own devices, CEOs will leave workers behind. Last week, The Washington Post ran a special report on the growing economic inequality in the United States. Executive pay has skyrocketed since the 1970s, while the incomes of most Americans have stagnated. According to the Post, “A mounting body of economic research indicates that the rise in pay for company executives is a critical feature in the widening income gap.”
As Jon Talton noted in The Seattle Times over the weekend, in 1980 the average CEO was paid 42 times what the average worker earned. In 2010, CEO pay was 343 times that of the average worker. Not surprisingly, many companies would like to keep this information quiet, and are resisting pressure to disclose their pay ratios. These accelerating income disparities and pay differences aren’t just mathematical curiosities; they’re a real problem that strikes at the heart of the endangered middle class.
According to the CIA’s World Factbook, inequality levels in the United States are now comparable to countries in the developing world. The United States is now less equal than Cameroon and Ivory Coast and only slightly ahead of Jamaica and Uganda.
That level of inequality isn’t just bad news for workers. It’s also weakening the economy and hurting our chances of a true recovery.
As Talton puts it, “It’s a problem that’s not just hurting millions of Americans and their future. It’s doing terrible damage to American capitalism.” His concern is echoed by economist Jared Bernstein, who notes that workers’ flat-lined wages are hurting the U.S. economy as a whole: “Nordstrom’s does well at one end of the barbell economy, and Walmart prospers at the other end. But there’s a gap in consumption, investment, and demand in general in the broad middle. And this dynamic could make it tougher for a recovery to take hold among the broad American middle class.”
How can we turn it around? Start with more workers having access to fair pay and a voice on the job through their union. According to the Bureau of Labor Statistics, union members earn, on average, 27 percent more than non-union workers.
Photo courtesy of jscreationzs