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TowardLiberty
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CEO Pay Is Not Rising Faster Than Pay For Average Workers
Mar 3rd, 2015 at 11:20pm
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This is the sort of thing that grabs my attention for it shows how the conventional wisdom on inequality is dead wrong.

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If you think the rich keep getting richer and the poor keep getting poorer, you should be forgiven for that misperception. After all, the media is full of stories telling you exactly that. Not everyone is an economist, a data analyst, or has the time to do all the research to investigate such claims. If you did, you would know that many of the common claims about economic inequality are false, based on either misuse of data or selective use of the facts that best serve their case. One of the most common stories is the ever widening gap between CEO pay and the earnings of average workers. Yet, the data actually show the opposite story.

A common example of the genre of CEO-to-worker pay gap stories was published recently at Vox.com based on data from 1983, 1993, 2003, and 2013. In the best tradition of selective use of facts that best serve their case, the earnings compared are the average pay for production and non-supervisory workers (not all non-CEO workers, which would be much higher) and the average pay of CEOs of S&P500 companies. With this comparison, the pay of the “workers” is lower than if a broader definition of workers was used. Even more importantly, CEO pay is enormously distorted upwards by using the pay of the few hundred highest paid CEOs rather than all CEOs.

The Bureau of Labor Statistics produces a data set called the Occupational Employment Survey which reports numbers and average earnings for a wide variety of occupations. This report provides average CEO pay for all chief executives rather than just the highest paid ones. As Mark Perry of American Enterprise Institute has reported previously, this changes the picture considerably.

The BLS OES data does not have CEO pay back to 1993, so I will just look at 2003 and 2013 here. In 2003, average pay for production and non-supervisory personnel was $26,900. In 2013 it had risen to $35,200, for a 31 percent increase over the decade. The pay of the S&P500 CEOs rose from $8.1 million in 2003 to $11.7 million by 2013. Thus, these top CEOs saw their pay rise by 44 percent which seems to confirm the common story about CEOs doing better than average workers.

There are almost 100 million employees that fit into the category of production and non-supervisory workers, so they represent about 75 of all workers. In contrast, there are about 6.5 million firms in the U.S.; if we count only firms with at least 100 employees, there are 1.5 million companies. So even if you think of legitimate CEOs as having at least 100 employees, the S&P500 CEOs represent only 0.03 percent of all CEOs. They do, to be fair, run companies with about 23 million employees, or about 17 percent of all workers. Still, they represent the top 3 percent of the top 1 percent of all CEOs.

In contrast, the BLS data for all CEOs says CEOs made on average $138,380 in 2003 and $178,400 in 2013. Thus, the pay of all CEOs rose by 29 percent, which is less than the increase in pay of production and non-supervisory workers In other words, the pay gap between “regular” workers and CEOs is nowhere near as big as it is commonly depicted as being and, most shockingly, has actually shrunk slightly over the past decade, not widened.


http://www.forbes.com/sites/jeffreydorfman/2015/03/03/blue-collar-worker-pay-is-...
  

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." J M Keynes

"In the first place, the dichotomy between "theoretical" and "practical" is a false one. In economics, all arguments are theoretical. And, since economics discusses the real world, these theoretical arguments are by their nature "practical" ones as well." M Rothbard
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #1 - Mar 3rd, 2015 at 11:52pm
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Analysis and discussion of these sorts of economic issues are often fraught with generalizations and stereotyping.  It makes for good, interesting articles when you can describe the stereotypical CEO up in the top floor of a New York high rise gloating that he paid less taxes than his secretary on his way out to his private jet to Switzerland and compare that to a 60 year old fry cook that has always been a fry cook, and pit them against each other.

In real life, most CEOs probably sit in a regular old office in a low rise building in the suburbs, work so many hours that they hardly have time for vacation and spend their days as workaholics with the constant stress of all of the lives that hang on their decisions.

And then there is the "average worker".  The worker who works day in and day out, and, as the meme goes, has not gotten a raise in X decades.  But, more than likely, that "average worker" does not and could not represent more than a small fraction of actual workers.

Because the average worker -- as in the average actual individual that carries out a career over their lifetime -- starts out as a below average worker and, through, a lifetime time of pay increases finishes as an above average worker (or at least with a general upward trend).  Even if the aggregate average stays put, because as he gains in income level, new low end workers are joining the workforce.

The common descriptions and stereotypes are a bit more romanticized and fictionalized than real life.   And writers that rely on dramatic contrasts to draw readers are easily sucked in, it seems, to statistics that aid them in that task.
  
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #2 - Mar 4th, 2015 at 12:01am
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wyattstorch2004 wrote on Mar 3rd, 2015 at 11:52pm:
Analysis and discussion of these sorts of economic issues are often fraught with generalizations and stereotyping.  It makes for good, interesting articles when you can describe the stereotypical CEO up in the top floor of a New York high rise gloating that he paid less taxes than his secretary on his way out to his private jet to Switzerland and compare that to a 60 year old fry cook that has always been a fry cook, and pit them against each other.

In real life, most CEOs probably sit in a regular old office in a low rise building in the suburbs, work so many hours that they hardly have time for vacation and spend their days as workaholics with the constant stress of all of the lives that hang on their decisions.

And then there is the "average worker".  The worker who works day in and day out, and, as the meme goes, has not gotten a raise in X decades.  But, more than likely, that "average worker" does not and could not represent more than a small fraction of actual workers.

Because the average worker -- as in the average actual individual that carries out a career over their lifetime -- starts out as a below average worker and, through, a lifetime time of pay increases finishes as an above average worker (or at least with a general upward trend).  Even if the aggregate average stays put, because as he gains in income level, new low end workers are joining the workforce.

The common descriptions and stereotypes are a bit more romanticized and fictionalized than real life.   And writers that rely on dramatic contrasts to draw readers are easily sucked in, it seems, to statistics that aid them in that task.


The more I look into the inequality debate the more it looks like a concerted effort to deceive people.

And of course to get support for higher taxes.
  

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." J M Keynes

"In the first place, the dichotomy between "theoretical" and "practical" is a false one. In economics, all arguments are theoretical. And, since economics discusses the real world, these theoretical arguments are by their nature "practical" ones as well." M Rothbard
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #3 - Mar 4th, 2015 at 12:05am
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TowardLiberty wrote on Mar 4th, 2015 at 12:01am:
The more I look into the inequality debate the more it looks like a concerted effort to deceive people.

And of course to get support for higher taxes.


A means to an end.
  
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #4 - Mar 4th, 2015 at 1:24am
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TowardLiberty wrote on Mar 4th, 2015 at 12:01am:
The more I look into the inequality debate the more it looks like a concerted effort to deceive people.

And of course to get support for higher taxes.



So, it is your "conclusion" that wealth/wage inequality is not growing?

http://www.epi.org/publication/why-americas-workers-need-faster-wage-growth/

http://www.huffingtonpost.com/2012/05/02/ceo-pay-worker-pay_n_1471685.html

It's good to be chief executive.

American CEOs saw their pay spike 15 percent last year, after a 28 percent pay rise the year before, according to a report by GMI Ratings cited by The Guardian. Meanwhile, workers saw their inflation-adjusted wages fall 2 percent in 2011, according to the Labor Department.

That's in line with a trend that dates back three decades. CEO pay spiked 725 percent between 1978 and 2011, while worker pay rose just 5.7 percent, according to a study by the Economic Policy Institute released on Wednesday. That means CEO pay grew 127 times faster than worker pay.

Income inequality between CEOs and workers has consequently exploded, with CEOs last year earning 209.4 times more than workers, compared to just 26.5 times more in 1978 -- meaning CEOs are taking home a larger percentage of company gains.

That trend comes despite workers nearly doubling their productivity during the same time period, when compensation barely rose. Worker productivity spiked 93 percent between 1978 and 2011 on a per-hour basis, and 85 percent on a per-person basis, according to the Federal Reserve Bank of St. Louis.

Meanwhile, workers saw their inflation-adjusted wages fall in recent years as corporations postponed giving raises while adding to their record corporate profits.
  
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #5 - Mar 4th, 2015 at 1:32am
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So, it is your "conclusion" that wealth/wage inequality is not growing?

http://www.epi.org/publication/why-americas-workers-need-faster-wage-growth/

http://www.huffingtonpost.com/2012/05/02/ceo-pay-worker-pay_n_1471685.html

It's good to be chief executive.

American CEOs saw their pay spike 15 percent last year, after a 28 percent pay rise the year before, according to a report by GMI Ratings cited by The Guardian. Meanwhile, workers saw their inflation-adjusted wages fall 2 percent in 2011, according to the Labor Department.

That's in line with a trend that dates back three decades. CEO pay spiked 725 percent between 1978 and 2011, while worker pay rose just 5.7 percent, according to a study by the Economic Policy Institute released on Wednesday. That means CEO pay grew 127 times faster than worker pay.

Income inequality between CEOs and workers has consequently exploded, with CEOs last year earning 209.4 times more than workers, compared to just 26.5 times more in 1978 -- meaning CEOs are taking home a larger percentage of company gains.

That trend comes despite workers nearly doubling their productivity during the same time period, when compensation barely rose. Worker productivity spiked 93 percent between 1978 and 2011 on a per-hour basis, and 85 percent on a per-person basis, according to the Federal Reserve Bank of St. Louis.

Meanwhile, workers saw their inflation-adjusted wages fall in recent years as corporations postponed giving raises while adding to their record corporate profits.

My conclusion is that pay for workers is growing slightly faster than pay for CEO's.

As to the question as to whether the "wealth/wage" gap is growing, I would suggest that it most likely is and that the financialization of the economy, along with the ACA, is a large reason why.

The HuffPo article is exactly the kind of sloppy analysis that I am speaking of.
  

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." J M Keynes

"In the first place, the dichotomy between "theoretical" and "practical" is a false one. In economics, all arguments are theoretical. And, since economics discusses the real world, these theoretical arguments are by their nature "practical" ones as well." M Rothbard
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #6 - Mar 4th, 2015 at 1:35pm
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TowardLiberty wrote on Mar 4th, 2015 at 1:32am:
My conclusion is that pay for workers is growing slightly faster than pay for CEO's.

As to the question as to whether the "wealth/wage" gap is growing, I would suggest that it most likely is and that the financialization of the economy, along with the ACA, is a large reason why.

The HuffPo article is exactly the kind of sloppy analysis that I am speaking of.


No TL, it is just your sloppy reasoning that leads you to false conclusions, and as usual, you didn't really read the article you posted. It doesn't even support your conclusions. Notice that it does not say t is not growing, only that it is not growing as fast as some would think.

"In contrast, the BLS data for all CEOs says CEOs made on average $138,380 in 2003 and $178,400 in 2013. Thus, the pay of all CEOs rose by 29 percent, which is less than the increase in pay of production and non-supervisory workers In other words, the pay gap between “regular” workers and CEOs is nowhere near as big as it is commonly depicted as being and, most shockingly, has actually shrunk slightly over the past decade, not widened."


Now TL, post something that shows the wages for the average worker are growing period. And since you like Forbes so much:

http://www.forbes.com/sites/francescoppola/2014/01/13/why-we-need-a-minimum-wage...

The simple fiscal argument for minimum wage legislation goes like this. Both the UK and the US have systems of in-work benefits that top up wages to a level sufficient to live on. So from firms’ perspective, when there is slack in the labour market (unemployment) they have little incentive to pay wages high enough to live on. And from workers’ perspective, they have little incentive to demand higher wages, especially if the consequence might be unemployment. If there is no minimum wage, therefore, then the co-existence of unemployment with in-work benefits drives down wages to below subsistence level.  As the majority of government tax income comes from households, not firms, over time this becomes unsustainable: all unskilled workers become in effect employees of the state, and the higher skilled are forced to subsidise the wages of the unskilled through rising taxes. There would inevitably be calls for in-work benefits to be cut, probably supported by demonization of the poor. Unskilled workers would be subject to the same accusations of “fecklessness” and “scrounging” as the unemployed already receive.  So in-work benefits without a legislated minimum wage are fiscally unsustainable and socially divisive when there is persistent unemployment.

This simple analysis does of course assume that unemployment is a real threat to a worker’s standard of living.  But arguments that the unemployed “choose leisure” imply that unemployment is a choice. If it is, then it cannot really be seen as a realistic threat. If the unemployed can refuse work without cost or sanction, then unemployment benefits themselves act as a minimum wage and there is no need for additional legislation.
  
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #7 - Mar 4th, 2015 at 1:53pm
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I looked at the BLS data that the blog post in the OP cited.  It posts data about wages alone, not total compensation.  Nowhere are stock options, restricted stock, golden parachutes, severance packages, and other perks.

It is highly amusing that the blogger is accusing anyone else of "selective use of the facts".
  

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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #8 - Mar 4th, 2015 at 2:03pm
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No TL, it is just your sloppy reasoning that leads you to false conclusions, and as usual, you didn't really read the article you posted. It doesn't even support your conclusions. Notice that it does not say t is not growing, only that it is not growing as fast as some would think.


Your inability to discuss the issue like a gentleman is duly noted.

But beyond that it seems to me that you are the one who did not read the article, or perhaps you did but failed to comprehend it.

The point of the article is to hi-light the fact that CEO pay broadly measured IS NOT growing faster than the pay of the median worker.

Let's not gloss over this stunning insight.

Quote:
"In contrast, the BLS data for all CEOs says CEOs made on average $138,380 in 2003 and $178,400 in 2013. Thus, the pay of all CEOs rose by 29 percent, which is less than the increase in pay of production and non-supervisory workers In other words, the pay gap between “regular” workers and CEOs is nowhere near as big as it is commonly depicted as being and, most shockingly, has actually shrunk slightly over the past decade, not widened."


Yeah, exactly.

That's a big revelation for our dutiful SJW's, such as yourself.

Quote:
Now TL, post something that shows the wages for the average worker are growing period.


I did. It was in the original article I posted.

"In 2003, average pay for production and non-supervisory personnel was $26,900. In 2013 it had risen to $35,200, for a 31 percent increase over the decade."

Quote:
And since you like Forbes so much:


I have no affinity for Forbes. This is not an argument from authority. You can find many articles from Forbes with which I would disagree. Quote:
http://www.forbes.com/sites/francescoppola/2014/01/13/why-we-need-a-minimum-wage...

The simple fiscal argument for minimum wage legislation goes like this. Both the UK and the US have systems of in-work benefits that top up wages to a level sufficient to live on. So from firms’ perspective, when there is slack in the labour market (unemployment) they have little incentive to pay wages high enough to live on. And from workers’ perspective, they have little incentive to demand higher wages, especially if the consequence might be unemployment. If there is no minimum wage, therefore, then the co-existence of unemployment with in-work benefits drives down wages to below subsistence level.  As the majority of government tax income comes from households, not firms, over time this becomes unsustainable: all unskilled workers become in effect employees of the state, and the higher skilled are forced to subsidise the wages of the unskilled through rising taxes. There would inevitably be calls for in-work benefits to be cut, probably supported by demonization of the poor. Unskilled workers would be subject to the same accusations of “fecklessness” and “scrounging” as the unemployed already receive.  So in-work benefits without a legislated minimum wage are fiscally unsustainable and socially divisive when there is persistent unemployment.

This simple analysis does of course assume that unemployment is a real threat to a worker’s standard of living.  But arguments that the unemployed “choose leisure” imply that unemployment is a choice. If it is, then it cannot really be seen as a realistic threat. If the unemployed can refuse work without cost or sanction, then unemployment benefits themselves act as a minimum wage and there is no need for additional legislation.

See you just found one!

The counter argument to the above is that minimum wage policies are one example of ways in which we institutionalize slack in the labor market, or unemployment.

Removing such policies would help the labor market to clear.

Further we know that minimum wage price controls end up benefiting middle class households at the expense of those with the least skills and experience. In other words, they harm the very people they are meant to help- the most marginal among us.
  

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." J M Keynes

"In the first place, the dichotomy between "theoretical" and "practical" is a false one. In economics, all arguments are theoretical. And, since economics discusses the real world, these theoretical arguments are by their nature "practical" ones as well." M Rothbard
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Re: CEO Pay Is Not Rising Faster Than Pay For Average Workers
Reply #9 - Mar 4th, 2015 at 2:53pm
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TowardLiberty wrote on Mar 4th, 2015 at 2:03pm:
Your inability to discuss the issue like a gentleman is duly noted.


If you are losing the argument, and know you do not have  a leg to stand on, you always fall back on your old reliable excuses. I think you always call that kind of tactic an "ad hom". Grin

Quote:
But beyond that it seems to me that you are the one who did not read the article, or perhaps you did but failed to comprehend it.

The point of the article is to hi-light the fact that CEO pay broadly measured IS NOT growing faster than the pay of the median worker.

Let's not gloss over this stunning insight.


Ahhh, the old "comprehension" problem. The article mentioned nothing about how fast the wages of the average worker grew, only that CEO pay did not grow as fast as in the past.


Quote:
Yeah, exactly.

That's a big revelation for our dutiful SJW's, such as yourself.


Oh my, yet another "ad hom", and still a false one.


Quote:
I did. It was in the original article I posted.

"In 2003, average pay for production and non-supervisory personnel was $26,900. In 2013 it had risen to $35,200, for a 31 percent increase over the decade."


And now for the truth:

http://america.aljazeera.com/articles/2015/2/19/new-analysis-finds-2014-was-anot...

http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have...

Quote:
The counter argument to the above is that minimum wage policies are one example of ways in which we institutionalize slack in the labor market, or unemployment.

Removing such policies would help the labor market to clear.


And place more people in poverty, dependent on government assistance, while increasing the wealth of the 1%.

Quote:
Further we know that minimum wage price controls end up benefiting middle class households at the expense of those with the least skills and experience. In other words, they harm the very people they are meant to help- the most marginal among us.


As we discussed before the effect on lower skilled workers is minimal at best. What can be easily proven by history is that the employee will not pay a person enough to live on unless forced to since your "market forces" have been proven to be quite inadequate in that area, or in most areas of the economy. And since the "war on unions" began with Reagan, we have seen the standard of living for most Americans decline. Of course, maybe you subconsciously want more socialism.

Interesting article here:

https://www.gilderlehrman.org/history-by-era/roaring-twenties/essays/roaring-twe...
  
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