The already massive CEO-worker pay chasm only widened over the course of 2021. (Alexander Mils / Unsplash)
The Fed has embarked on an anti-inflation policy designed to destroy jobs and keep wages low. But a new report shows just how exorbitantly CEOs are profiting from the price hikes.
As an impending war on workers’ wages gathers steam, there’s comparatively little talk about the gargantuan pay packets of corporate executives. That’s too bad, because a new report suggests those pay packets have ballooned to new, ever-higher levels even as worker pay has stagnated.
The report from the Institute for Policy Studies (IPS) is the latest of the organization’s annual series of Executive Excess reports, this time examining CEO pay at three hundred publicly held US corporations that recorded the lowest median wages in 2020. What the IPS found is as depressing as it is unsurprising: the already massive CEO-worker pay chasm only widened over the course of 2021, and worker pay at many of the companies has fallen behind inflation, even as corporate profits have been turned into millions of dollars more for individual executives.
According to the report, CEO pay at these low-paying firms rose by 31 percent to an average of $10.6 million, pushing the average ratio of CEO-to-median-worker salary to 670-to-1, up markedly from 2020’s gap of 604-to-1. Forty-nine of the firms even recorded pay gaps of an astounding 1,000-to-1.
Few reading this will be surprised to hear who the worst offender was: Amazon, whose CEO-to-worker pay gap grew an unfathomable 11,062 percent over 2020. CEO Andy Jassy, who took over from Jeff Bezos in 2021, at least nominally — Bezos and Amazon have made clear he’s staying involved in the company and was mostly handing over day-to-day responsibilities — ended up making $212.7 million last year, or 6,474 times the average Amazon worker pay of $32,855. Besides union-busting efforts directed by the exorbitantly compensated Jassy, Amazon workers have to contend with intense workplace surveillance, discrimination and harassment, and notoriously hectic working conditions that force them to pee in bottles or skip bathroom breaks.
Other top offenders include Abercrombie & Fitch, whose CEO takes home a salary 3,282 times the size of that of his median employee, toy maker Mattel (2,705), tobacco supplier Universal Corporation (2,683), the Gap (2,485), footwear brand Skechers (2,265), and McDonald’s (2,251).
Some firms in particular saw their CEO-to-worker pay gaps widen astronomically over the course of 2020, like digital payment services company FleetCor Technologies (a 3,595 percent rise in the CEO-to-worker pay gap), clothing retailer Urban Outfitters (3,400 percent), casino and racetrack operator Penn National Gaming (1,145 percent), electronics multinational Methode (1,096 percent), and hair salon operator Regis Corporation (969 percent). Jay Snowden, the CEO of Penn National Gaming, which is planning to take full ownership of Barstool Sports next year, took home the third-largest payday of all the CEOs covered in the report, with $65.9 million.
At the same time they were doling out massive paydays to their CEOs, 106 (35 percent) of these 300 hundred low-paying firms paid their workers a median wage that fell behind the 4.7 percent average US inflation rate over 2021, states the report. In fact, sixty-nine of these firms saw their worker pay fall.
It’s not that these firms didn’t have the money to pay their workers better while inflation soared. As the report points out, of those 106 firms where median worker pay didn’t keep up with inflation, sixty-seven spent a collective $43.7 billion on stock buybacks to pump up their CEOs’ stock-based paychecks. According to the report, Lowe’s, Target, and Best Buy, for instance, could’ve given all of their employees a raise of $40,000, $16,000, and $32,270 each respectively, if they had spent the billions they blew on stock buybacks on their workforce instead.
The report’s findings come amid a national debate over inflation that has consistently stressed the impact of higher worker wages and government policies that put money into average people’s pockets. Meanwhile, the idea that corporate price gouging has played some role has been cast by some as a “conspiracy theory.”
Of course, the biggest risk of further inflation comes from the supply shocks caused first by the pandemic and now Moscow’s invasion of Ukraine and the Western sanctions that came in response. But the impetus has also come from opportunistic price hikes by profit-hungry companies taking advantage of the widespread public awareness of inflation to sneak through added price hikes. A recent Guardian investigation based on Securities and Exchange Commission (SEC) filings and investor calls for a hundred US corporations found executives disclosing they were raking in massive windfalls as profits far outpaced inflation, with executives openly admitting their price increases outstripped inflationary costs.
Meanwhile, the Federal Reserve is embarking on a series of interest rate hikes that will at minimum cause job losses and at worst stagflation and a recession. The main target of these rate hikes is what Fed chair Jerome Powell called “an extraordinarily strong labor market,” which has given workers the leverage to get the higher pay Powell believes is now driving runaway price increases.
Powell has said his strategy for tackling inflation will involve “some pain” and declared in a May press conference that outlined his belief in the need to stifle wage growth that “we can’t allow a wage-price spiral to happen.” An imbalance in supply and demand for the job market means “wages are running at the highest level in many decades,” he explained, and the Fed’s policies would enable “further healing in the labor market” to bring them “back into balance.” The “healing” Powell is euphemistically referring to in reality means the erasure of job opportunities, which will erode workers’ bargaining power and make them more willing to take on jobs with substandard working conditions, including low pay.
While all of this is taking place, the IPS report reminds us, the price gouging and extravagant salaries of corporate executives go conveniently ignored in the debate over inflation and the government’s seemingly willful failure to tackle them. The report notes that the Joe Biden administration has dragged its feet on using the federal government’s contracting power to tackle the widening CEO-to-worker pay gaps, which it could easily do: 119 (40 percent) of the 300 companies examined got federal contracts between October 2019 and May 2022, to the tune of $37.2 billion, a massive sum that could be leveraged to force the firms elbowing for a place at the trough to put in place fairer pay practices.
We seem to be on an irreversible course to repeat the disastrous economic shocks of the 1970s and early 1980s, all in the quest of suppressing whatever meager advances low-wage workers have seen in their paychecks these past couple of years. And meanwhile, the corporate profiteers robbing us blind laugh all the way to the bank.
Branko Marcetic is a Jacobin staff writer and the author of Yesterday’s Man: The Case Against Joe Biden. He lives in Chicago, Illinois.vely little talk about the
Jacobin, June 10, 2022, https://jacobin.com/
The already massive CEO-worker pay chasm only widened over the course of 2021.