Wages Out Of Whack: As We Celebrate The Minimum Wage, CEOs Make 273 Times The Average Worker

July 2, 2013  |  

According to The AtlanticCEOs today make between 202 and 273 times what the average worker is making. Compare that to 30 years ago when they were making less than 30 times what workers made. (Numbers come from the think tank Economic Policy Institute.)

“The job market certainly hasn’t fully recovered from the recession, but corporate profits have been on a tear along with share prices. And since the 1980s, executive compensation has been pretty tightly correlated with the stock market’s performance. When investors do well, management does well,” the magazine says. The conservative perspective is that CEOs have become increasingly important. Liberals, like the Economic Policy Institute, say CEOs have been able to dictate their own pay packages. So naturally, they think they deserve a lot. Either way, there’s a growing chasm between the haves and have nots.

On the flip side, last week was the 75th anniversary of the minimum wage. On that anniversary (last Tuesday), the Obama administration pushed for a raise in the federal minimum wage. The argument is the minimum wage hasn’t kept up with the increase in the cost of living. Some say, if it were to meet that standard, the minimum wage would be more than $21 per hour. Democrats in the House and Senate proposed the Fair Minimum Wage Act of 2013 to raise the minimum wage to $10.10, and there’s talk of new policy proposals that would bring pay standards to industries that didn’t previously have them.

“It’s about time we stop treating work in fields where women are the majority as less valuable than in male-dominated fields,” VP Joe Biden said last week.

On the other hand, there are some who say that raising the minimum wage can do a good deal of harm. Michael Saltsman, research director at the Employment Policies Institute, says research shows that when the minimum wage goes up, the number of jobs for “less experienced people” like teens goes down. “In some cases, that might mean employers cut back on their current staff, like a small restaurant opting to hire three teens for the summer instead of four. In other cases, employers can shift towards lower-cost, self-service alternatives – pumping your own gas instead of having someone pump it for you, or (more recently) bagging your own groceries at a self-check-out instead of hiring a young person to do it,” Saltsman told MadameNoire via email. In fact, he says there are “empirical strategies” that isolate the number of jobs that are lost when the minimum wage goes up.

In that same email, Saltsman wrote:

Raising the minimum wage isn’t an effective way to reduce poverty for a few reasons. First, Census data shows that about 60% of the people current living below the poverty line don’t work, and thus can’t benefit from an increase. On the flip side, a majority of those who are earning the minimum wage aren’t living in poor families. So, if we want to make a dent on poverty, we need a policy that targets those families effectively. That’s why we’re supportive of bolstering policies like the Earned Income Tax Credit, which boosts paychecks without the unintended consequences of a higher minimum wage.

As Los Angeles Times columnist Michael Hiltzik notes, the current minimum wage is $7.25, 22 states set it lower, eight set it higher, a couple, like California, up over $9 per hour. Some version of the argument proposed by Saltsman and the Employment Policies Institute against raising the minimum wage is a common one, the article says. It continues, “despite decades of searching, economists have failed to document consistently any such phenomenon.”

“By and large, economic studies find that there’s either no effect on overall employment rates whatsoever, or that the effect is too small to measure accurately and most likely swamped by more powerful factors, including the economic cycle… There’s even some evidence that a higher minimum wage may increase employment by putting more money in the pockets of low-wage earners, thus strengthening the economy, though the strength of the effect is hard to pin down. In any case, smart employers know that better wages cut absenteeism and worker turnover and raise productivity, all of which flow to the bottom line,” it says.

At its most basic level, putting money in people’s pockets should be reason enough to increase the minimum wage, the article finishes. CEO wages have increased over past decades, and increased by a lot. So why shouldn’t the average worker’s? And, if you recall, during the 2012 election, one of the talking points for the Republican candidates was the need to lower taxes to put more money in the pockets of average Americans. So why shouldn’t the federal minimum wage increase to help facilitate that?

It’s a debate we will continue to have, and one we should give close consideration to. What’s your feeling on the minimum wage? Should it increase?

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