CEO-to-worker pay ratio shows vast gap

ceo payINTERNET

Graphic by Autumn Mariano

Many Americans faced hard times during the economic downturn, but studies show CEOs earn significantly more than they have in the past.

According to the American Federation of Labor and Congress of Industrial Organizations, the CEO-to-worker pay ratio has been on a constant climb since the late ’70s to early ’80s. Starting at 42 to 1 in 1980, the ratio rose to 354 to 1 in 2013.

“There are a number of historically well-established relationships that got broken at that point in time, (and) one is the link between productivity and wages,” said Jeff Steagall, dean of Weber State University’s John B. Goddard School of Business & Economics. “Productivity would raise 5 percent, then wages would raise 5 percent, and that link is broken.”

Steagall attributed the changes in mergers and acquisitions as the primary reason for the shift.

Ken Atair, a WSU senior, said he is more worried about the people at the bottom than the middle class. He said it hurts as a McDonald’s employee to be stuck making $7.25 an hour and riding a bike to work while his bosses swim in money.

Atair clarified that he doesn’t want to punish people at the top; he just wants more opportunities for the less fortunate.

“There are certain people who aren’t going to take opportunities, but there a lot of people who are held back because there is no opportunity,” he said.

While CEOs making millions of dollars isn’t inherently bad in itself, one WSU student experienced effects on her family.

“My dad got laid off because they said they didn’t have enough money to pay him, yet the person who was in charge got a 50 percent pay increase,” said WSU junior Ireland Green. “I think they (CEOs) could stand to take less.”

The National Bureau of Economic Research performed a study that found upward mobility is stagnant in the United States.

“The findings also suggest that who your parents are and how much they earn is more consequential for American youths today than ever before,” wrote Jim Tankersly, reporter for the Washington Post.

The study showed getting to the top isn’t any easier than it was before, making it challenging when the gap is widening.

Tyler Hall, WSU Davis campus senator, said he sees the lack of mobility as the real problem.

“It’s next to impossible to get from the mail room to be the CEO,” he said.

Elected leaders will likely need a solution to the problem in the next few years. Steagall said he believes stronger education at the primary and secondary school levels along with making college more affordable is the solution.

“Education is the answer to the elimination of poverty,” he said.

America maintains a higher CEO-to-worker pay ratio than most other countries in the industrial world. Canada sits at 20 to 1.

“We’re very individualistic here: ‘I made this company, I deserve it,’” Green said. “(In) Canada it’s more like, ‘How about I help others?’ but here it’s all about ‘me.’”

Despite the growing wealth disparity, Steagall pointed out that many of the students graduating are getting good-paying jobs at good companies. He said becoming middle class is easily feasible for a student after graduating. The key, he said, is to never stop learning.

“In a world that is changing as fast as our world is changing, you better keep learning,” Steagall said, “because everywhere else around you is.”

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Posted by on January 26, 2014. Filed under Business/Careers, News, Top Features. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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