The Rising Pay Gap between CEO and Average Workers

As the gap between CEOs and the rest of the workforce has expanded over the decades, it has
become a heated topic.

In 2020, the top 350 CEOs in the United States earned over 24 million dollars on average,
implying that the ordinary worker would have to work for 351 years to earn what they did in
one year. However, it wasn't always this way. The pay gap has widened dramatically over the
last few decades, with the Economic Policy Institute estimating that CEO pay has increased
by 1322 % since 1978. While the average worker's pay has only increased by 18%.
According to the Institute for Policy Studies, 80 percent of S&P 500 companies pay their
CEOs over 100 times more than they pay their median workers. This means that an average
employee at one of those companies would have to work for 100 years to earn what their
CEO earns in a year, which is physically impossible. Families across the country and across
the political spectrum are experiencing anxiety as a result of this inequity. A majority of
Americans believe future generations will be worse off financially, according to Pew
(Research Center).

Despite the fact that the coronavirus pandemic imposed wage cuts, unpaid leave, and layoffs
around the world, a new Equilar study of the highest-paid chief executives at public firms
done for the New York Times found that CEO pay continued to climb in 2020 in compared to
employee pay. CEO pay jumped 14.1 percent in 2020 over 2019, according to the New York
Times, while median worker pay increased 1.9 percent.

Typical worker compensation has only increased by 18% in the last 40 years, significantly
less than what the economy has created, and if you look at what workers could have earned,
it's more in the range of 60%, but they only got 18%. The following are the key reasons for
this:

• Unemployment is high, forcing workers to accept the lowest available earnings.

• Globalization, which enables businesses to find the cheapest workers wherever on the
planet.
• The decline of unions, making it more difficult for workers to bargain collectively.
• Poor working conditions, including a low minimum salary.
• The rise in non-compete agreements, making it more difficult for workers to obtain
better jobs in their field.
• Domestic Outsourcing, such as transitioning to a Freelancer Workforce.

CEOs now earn 351 times as much as the average worker, compared to only 31 times in 19 78
and 61 times in 1989. CEO compensation will continue to climb, despite pay ratio taxes and
other measures, if the past few decades provide any clue. Politicians and campaigners, on the
other hand, will be on the alert for it and will likely be more aggressive in combating it.
While pay ratio taxes are unlikely to have a significant impact on corporate pay practices in
the short term, they are raising public awareness of salary disparities.