Former senator John Edwards is best known for his scandal-ridden, failed presidential campaign, but he did manage to succeed in gaining more awareness for poverty as a national crisis. During his 2004 run for the White House, Edwards often spoke of the economic disparities between the haves and the have-nots, something he called, the “Two Americas.” Seventeen years later, those disparities are not only still with us, but they are growing. According to the U.S. Census Bureau, there are over 34 million people living in poverty, and 12 million of those are children. It’s a sad situation caused by low wages, where these families are living off of $26,000 a year or less. But hey, we’ve just come out of a pandemic, so everyone is hurting, right? Wrong.
Last year, while America was under siege by COVID-19, the average CEO made $15.5 million, while the average nonsupervisory worker made $43,000. That’s a ratio of nearly 300 to 1, which prompted former Xerox CEO Ursula Burns to tell Reuters, “Astronomical CEO pay during the pandemic is abuse.” But in many cases, the gap is much wider. In 2019, for example, Disney CEO Bob Iger made $65 million, or 1,400 times more than what he paid his average employee. Closer to home, Marvin Ellison, CEO of Lowe’s Companies, made $23 million last year, which is 940 times what he paid his average worker. That report comes from a recent article by the Winston-Salem Journal’s Richard Craver, who also revealed that Hanesbrands CEO Stephen Bratspies made nearly 700 times what he paid his employees, 88% of who work in third world countries.
One could argue that CEOs have always earned more than the people they employ, but the greed factor was never this extreme. According to the AFL-CIO, in 1982, the ratio of CEO to worker pay was only 42 to 1. But by 2012, that ratio jumped to 354 to 1, and there’s no indication that the pay gap will significantly decrease any time soon. So what’s the solution?
Fixing the pay gap can be achieved in one of two ways, either by self-regulation or by government regulation. 68% of the Swiss people chose the latter back in 2013 when they voted to enact the “Popular Initiative Against Abusive Executive Compensation.” Among other things, the initiative bans golden parachutes either at the point of recruitment or severance. Lord Wolfson, former CEO of NEXT Clothing, chose the former option for reform when he decided to give his $3.7 million bonus to his employees. And, long-time Bank of South Carolina CEO Fleetwood Hassell, agreed to cap his salary at four times that of his average employee, who, eight years ago made $48,000 per year. Meanwhile, Sen. Bernie Sanders wants to enact tax penalties for any company whose CEO pay ratio exceeds 100 to 1. Each approach has merit, so perhaps the best solution is for Congress and industry leaders to work together to create a hybrid initiative that encompasses the best elements of each. In any event, we need to make a course correction sooner than later.
In Craver’s report, he cited a 2018 study by the Institute for Policy Studies, which concluded that if something isn’t done, “the typical employee would have to work at least a thousand years to earn what their CEO made in just one year.” Unfortunately, there will always be a pay gap between executives and employees, and that’s why there will always be two Americas. But there’s no reason why the two Americas have to exist so far apart.
Pay Gap Widening Between CEOs & Workers
Former senator John Edwards is best known for his scandal-ridden, failed presidential campaign, but he did manage to succeed in gaining more awareness for poverty as a national crisis. During his 2004 run for the White House, Edwards often spoke of the economic disparities between the haves and the have-nots, something he called, the “Two Americas.” Seventeen years later, those disparities are not only still with us, but they are growing. According to the U.S. Census Bureau, there are over 34 million people living in poverty, and 12 million of those are children. It’s a sad situation caused by low wages, where these families are living off of $26,000 a year or less. But hey, we’ve just come out of a pandemic, so everyone is hurting, right? Wrong.
Last year, while America was under siege by COVID-19, the average CEO made $15.5 million, while the average nonsupervisory worker made $43,000. That’s a ratio of nearly 300 to 1, which prompted former Xerox CEO Ursula Burns to tell Reuters, “Astronomical CEO pay during the pandemic is abuse.” But in many cases, the gap is much wider. In 2019, for example, Disney CEO Bob Iger made $65 million, or 1,400 times more than what he paid his average employee. Closer to home, Marvin Ellison, CEO of Lowe’s Companies, made $23 million last year, which is 940 times what he paid his average worker. That report comes from a recent article by the Winston-Salem Journal’s Richard Craver, who also revealed that Hanesbrands CEO Stephen Bratspies made nearly 700 times what he paid his employees, 88% of who work in third world countries.
One could argue that CEOs have always earned more than the people they employ, but the greed factor was never this extreme. According to the AFL-CIO, in 1982, the ratio of CEO to worker pay was only 42 to 1. But by 2012, that ratio jumped to 354 to 1, and there’s no indication that the pay gap will significantly decrease any time soon. So what’s the solution?
Fixing the pay gap can be achieved in one of two ways, either by self-regulation or by government regulation. 68% of the Swiss people chose the latter back in 2013 when they voted to enact the “Popular Initiative Against Abusive Executive Compensation.” Among other things, the initiative bans golden parachutes either at the point of recruitment or severance. Lord Wolfson, former CEO of NEXT Clothing, chose the former option for reform when he decided to give his $3.7 million bonus to his employees. And, long-time Bank of South Carolina CEO Fleetwood Hassell, agreed to cap his salary at four times that of his average employee, who, eight years ago made $48,000 per year. Meanwhile, Sen. Bernie Sanders wants to enact tax penalties for any company whose CEO pay ratio exceeds 100 to 1. Each approach has merit, so perhaps the best solution is for Congress and industry leaders to work together to create a hybrid initiative that encompasses the best elements of each. In any event, we need to make a course correction sooner than later.
In Craver’s report, he cited a 2018 study by the Institute for Policy Studies, which concluded that if something isn’t done, “the typical employee would have to work at least a thousand years to earn what their CEO made in just one year.” Unfortunately, there will always be a pay gap between executives and employees, and that’s why there will always be two Americas. But there’s no reason why the two Americas have to exist so far apart.