
US bosses now earn 312 times the average worker's wage - eplanit
https://www.theguardian.com/business/2018/aug/16/ceo-versus-worker-wage-american-companies-pay-gap-study-2018
======
maxxxxx
"the bosses of America’s largest companies got an average pay rise of 17.6% in
2017, taking home an average of $18.9m in compensation while their employees’
wages stalled, rising just 0.3% over the year."

That's the worst part of it. Companies are split up in two sections. One that
benefits from the company's success while others get almost nothing. I see
that in my company. In meetings they celebrate increased revenue and earnings.
When I look around almost nobody except a few top guys I see benefits from
that success and instead has to wonder when his job goes to India.

There was a discussion here about increasing employee participation. I really
think we should get away from the belief that only shareholders count but also
acknowledge that employees and even the communities where the company has its
buildings have a stake.

~~~
sgslo
It seems as though there are two competing issues tied to pay inequality:

1) Increasing inequality of social power between the mega rich and the common
person

2) A feeling of unfairness as business leaders take home the lions share of
profits

#1 is a true issue, _but_ , let's be honest here, the average CEO's level pay
isn't contributing to increasing inequality. That McDonald's CEO had a yearly
take home pay of 21.7m. That's _unbelievable peanuts_ compared to the wealth
of the mega-rich. It is the multi-billionaires flexing their political muscles
and exerting influence that leads to the nasty consequences of pay inequality.

As to #2, I understand the unfairness, but fail to understand the social
consequences of it. In other words - what harm to society is being done by a
manager getting paid more than a line employee? You mentioned offshoring jobs,
but that is a separate issue, not tied to pay inequality.

~~~
jonathankoren
The problem with wealth inequality is that it's the same distorting forces of
a monopoly. A small cadre use their wealth an influence to shape politics to
serve their interests. Markets chase after small lucrative pools of customers.
(For example, luxury condos get built, but affordable housing does not.)
Education gets warped as the wealthy concentrate in small neighborhoods and
thus improving those schools, while the rest fall farther and farther behind.
The macroeconomy becomes more unstable as it's driven by the fads whims of the
few. This instability and political disenfranchisement then leads to political
instabilities and eventually sudden political upheavals where entire
political, social, and economic systems are overthrown for sake of reform, but
at the same time just leads to more extreme instability.

Until ironically, the wealthy simply leave (because who wants to stay in an a
dangerous unstable place, when you can afford to leave), and let place that
they set on fire burn to the ground, click their tongues and say, "Who knew
this would happen?"

To think of it another way, no one puts all bets on a single investment. You
diversify. That's what spreading the wealth does. It diversifies opportunity.

~~~
maxxxxx
"he wealthy simply leave (because they can afford to), and let place that they
set on fire burn to the ground,"

There was a movie while ago where the rich people lived in space in beautiful
habitats, had technology that could heal anybody while the rest had to labor
on Earth under terrible conditions. Don't remember the name but maybe the move
isn't that fictitious.

~~~
godzillabrennus
[https://en.m.wikipedia.org/wiki/Elysium_(film)](https://en.m.wikipedia.org/wiki/Elysium_\(film\))

Elysium is the film.

~~~
ajeet_dhaliwal
Great movie. I liked the way the regular citizens (the non leadership) of
Elysium were portrayed as largely oblivious or lacking in any care to the
sufferings on Earth.

~~~
maxxxxx
That's probably how I as middle class would look from the view of a poor
person in the third world :-).

------
weeksie
It's simple: workers have less bargaining power than they used to have so they
can't demand a share of the profits the way that those at the top can. I'm not
a fan of unions because they have the same power-structure problems that any
large organizations have, but the rise in pay inequality clearly coincides
with the decline of unions.

No idea what the answer is. Whether it's some version of ensuring a worker
advocate is on the board of a corporation or that some kind of coop ownership
scheme gives employees voting rights, hell I have no idea, but pay inequality
won't change on its own.

Workers that have done well are those who can either draw a direct line
between their contribution and profits (sales) or are scarce enough to demand
high compensation (tech workers). Most everybody else is shit out of luck from
a negotiation perspective, at least without some form of collective action.

~~~
maxxxxx
Unions have to make a comeback. Look at German unions. They are organized over
a whole industry, not just companies, have a seat on the board of directors. I
think this system works really well.

~~~
pkhagah
I'm not confident that Unions would work for huge issue that is coming up -
Mass Mechanization. There will be very few jobs Robotics will not be able to
replace in a decade or so. This will easily facilitate few people owning large
chunks of means of production. I don't see any serious solutions to this issue
on the horizon.

------
jandrewrogers
This is only the 350 highest paid CEOs in the US -- there are >50k enterprises
of substantial size in the US. The _median_ pay for CEOs per the government is
less than many medical professionals. Some CEOs receive lavish compensation
but _most_ work for wages of a Silicon Valley software engineer.

I'd much rather work as a software engineer than a CEO.

~~~
pcarolan
I love this perspective. Do you have data to support it?

~~~
onefishtwofish
> The median pay for CEOs per the government

[https://www.bls.gov/oes/current/oes111011.htm](https://www.bls.gov/oes/current/oes111011.htm)

------
roenxi
If I put my shareholder hat on I can believe that competence at the CEO level
is 312x more valuable than at the worker level.

Personally, I'm suspicious that all the extra money won't correlate with any
sort of useful increase in performance. How is paying these people more going
to encourage better decisions? It just means they'll have more comfortable
holidays. I've seen head-office politics, and believe that the system used for
promotions can tell great from terrible. But there is no way it has the
capability of picking who would be best choice to run a company out of 50
senior management figures. There is a lot of pot luck in whether the market
conditions are favorable in any given CEOs tenure. Anyone 3-4 levels away from
the frontline probably has a reasonable shot at being the best choice to
manage a large company.

~~~
village-idiot
Iirc studies have shown very little correlation between executive compensation
and company productivity/profitability.

The CEO is worth more than the typical janitor or manual laborer, you’d be
pretty hard pressed to prove otherwise. But the current compensation scheme
seems to be way out of wack with what each employee actually brings to the
table.

~~~
zimablue
I think this study has the same problem as the argument that hedge funds are a
waste of time because hedge funds don't make money on average. Imaging the
average return of hedge funds was 50%, what would happen? people would open up
more and more less and less competent hedge funds until it was a flat return
and no longer attractive.

You're measuring the results post (arguably) a market force which has impacted
the results. If paying managers more than the current average showed obvious
results, the average would go up. You also have correlation/causation.

I'm not sure if i'm pro bosses mental pay or whether I think it makes any
difference just don't buy this argument/study.

~~~
jimbokun
"I think this study has the same problem as the argument that hedge funds are
a waste of time because hedge funds don't make money on average."

Maybe they are a waste of time, on average?

~~~
zimablue
Not making money on average like I'm trying to say is a true but meaningless
statement.

But there's a difference between the statement:

"I can't make money on average by putting money into this system (this system
isn't undervalued)"

and "This system is worthless" which is kind of conflated. Like the system
will always expand to the point that there's no free cash on the table, so
looking at it and saying "on average paying more for CEOs or putting money
into a random hedge fund doesn't move the dial" has no bearing on whether
executive pay being high or hedge funds existing is keeping money off the
table (if they were smaller/lower there would be gain to expanding).

The gradient at the equilibrium is always zero, "We found that paying
developers more or less doesn't impact the average success of a firm". Yeah
because there's an equilibrium where the firms/market has decided roughly what
a developer costs, and everyone is paid close to that. That's not an argument
that developer pay should be wildly less, because if the average was moved to
"developers make $10k per year" than at THAT point, far from the equilibrium,
you'd see a big gradient that firms who paid developers more (ergo probably
got better devs) did far better.

------
anilshanbhag
Average Walmart worker earned $19,177 in 2017 while CEO Doug McMillon took
home $22.8m – a ratio of 1,188-to-one. Yes its a big number, however I don't
see anything wrong here. Walmart has around 2.3m workers, Doug's salary is
roughly $10 per worker per year. Also, $23M is chump change as he is doing a
great job in moving Walmart (just this morning Walmart stock increased 10% ==
$26B - 1000x his salary).

Salaries are only part of the equation. For example, Drew Houston (founder of
Dropbox) is worth $3 billion while an software developer at Dropbox has net
equity of less than $1 million. Thats 3000-to-1.

~~~
jmcqk6
So what about the fact that the average worker earned a salary low enough to
qualify them for foodstamps (given a household size of 2)? Basically walmart
is paying these low wages and getting subsidized by the federal government so
that their workers can eat.

Or when you say "I don't see anything wrong here" are you really just limiting
yourself to the difference between average worker salary and ceo pay?

~~~
zdragnar
Worker pay is a function of the available supply of people capable and willing
to work the job and the opportunity cost of not filling the position.

The opportunity cost of not filling a low paying job is generally quite low.
Likewise, the wages for such jobs vary quite a bit, moreso than cost-of-living
differences would account for.

If you want to price wages based on some moral virtue, you will risk losing
investors, or hurt poor people (aka your customers) by raising prices. In your
scenario, it isn't Walmart that's being subsidized, it's a community with so
many people desperate for work but not qualified enough to get a better job
that they're willing to take a job that doesn't pay enough.

~~~
aerotwelve
Don't you think there are plenty of people out there that would be willing to
do Doug's job just as well (or better) for < 22.8 million?

~~~
zdragnar
There certainly are. Some of them might even have the experience that would
lead the board to believe that they could do it successfully.

What's the point? CEO positions should be chosen by random lottery? The
company either offered a large enough chunk of money to attract the most
talented / experienced individual they could, or Doug negotiated strongly
enough to convince them that hiring him to CEO would be worth paying him that
much.

------
forinti
As the US's gini gets closer and closer to Brazil's, its politics start to
look similar also.

~~~
marcosdumay
When you marginalize people, they'll look more and more outside of society's
box.

The US is luck in that there are plenty of opportunities for non-workers
without advanced education to make their life, but there is no way their
inequality can keep increasing without those opportunities disappearing (as
they depend on a middle class). When they disappear, the only thing out of
society's box will be crime.

If you want to know how the US will become once it gets more similar to
Brazil, take a look at Brazil.

------
makecheck
The problem, as always, is that there are no _apparent_ penalties for being
Worst CEO Ever, except “fewer millions of dollars”. And the screw-ups are the
ones that make workers say “hell, pay me 1/100th of what you paid him and I
can make bad decisions too!”.

Worse, there is a scale of effect here. If you take a million dollars away
from even an above-average worker, his life savings is gone and he’s screwed
and in debt. If you take it away from an overpaid exec, he’s just a little
pissed but he’ll be fine. Heck, the excellent PR alone should make it a good
idea for companies to spread extra millions among workers, as it is
unquestionably the right thing to do morally (besides: the workers probably
deserve it due to inflation alone, the company _will_ do better due to worker
motivation, etc.).

------
village-idiot
I’m worried that this is starting to get to destabilizing levels of
inequality.

~~~
sgc
It's well beyond that already. There is just a lag between the condition and
its effect. But if you look at American politics, it seems we might be in the
midst of the destabilization process.

~~~
village-idiot
I live there, so I’m not super thrilled about this social experiment.

------
GlobalFrog
That reminds me of a study about the ancient Rome by Walter Schiedel et Steven
Friesen (The Size of the Economy and the Distribution of Income in the Roman
Empire) Link there :
[https://doi.org/10.3815/007543509789745223](https://doi.org/10.3815/007543509789745223)
To sum it up, they studied the economy of that time and noticed a few things :
the "elite" (1,5% of pop.) had about 20% of the state wealth, they studied the
other classes, and reached the conclusion that the economy structure could not
allow for more concentration of the wealth. And if you analyze the numbers,
the inequality in the USA is more important today than it was in Rome. That's
quite striking when you remember that in Rome, they had slaves, their kind of
nobility, domination of vast lands and resources...

I don't know where, but I read something else about Rome, and the parallels
with today :

\- the candidate elected to an office was the one who spend the more money on
90% of the time

\- the draft abolition led to distancing the citizens to the blood shed in
wars, and there was a rise in the use of mercenaries ("private contractors")

\- the empire expanding, being a citizen was not being simply a white guy born
close to the country.

All those three points were true for Rome and they are today true also for
most of the Western countries. In Rome, it led first to the fall of the
Republic, the rise of the empire, the growth of inequalities and its fall. So
my guess is that all Western countries should think about it, because they all
have some similarities with this society evolution course.

~~~
orf
The elite also retreated into their estates, away from the law. This led to
perverse insentives where they would withhold fighting men from the state,
illegally, as the empire desperately needed men to replenish losses.

There are many parallels to draw, not all are valid given the 1500 year
difference, but... Yeah.

------
pome
Maybe somewhere there are CEO/Workers salary statistics by country in 2018?
I'm found only this[0], but 2014 years.

[0] [https://www.statista.com/statistics/424159/pay-gap-
between-c...](https://www.statista.com/statistics/424159/pay-gap-between-ceos-
and-average-workers-in-world-by-country/)

------
pitaj
"The society that puts equality before freedom will end up with neither. The
society that puts freedom before equality will end up with a great measure of
both."

\- Milton Friedman

~~~
ionised
Milton Friedman was one of a few economists responsible for what would become
the neoliberal economic policies that free markets are infallible that we have
today.

Policies that have benefitted primarily the already wealthy amassers of
capital and which are in large part responsible for the massive income
inequality and erosion of labour rights that is present for the first time
since the Gilded Age.

His idea of human beings as rational, self-interested economic actors that is
a ludicrously narrow model of the human being and has been disastrous for the
working and middle classes all over the developed world.

Quotes from Friedman are worth nothing to me, personally.

~~~
fbonetti
> His idea of human beings as rational, self-interested economic actors that
> is a ludicrously narrow model of the human being

Sure, but in order to understand human behavior on the scale of millions of
people making billions of transactions, you need to start with a simple axiom
and move on from there. I think people hear the word "self-interest" and think
"greed", and assume that mainstream economics must be predicted on a very
cynical view of human beings. That's not the case at all. We all want to
survive. We can't possibly understand the individual needs of other people
outside of a small circle of people that we love and care about. None of us
are omniscient. The beautiful thing about markets is that none of us need to
have perfect information in order to participate. By simply buying the things
we need and selling things the things we don't, prices emerge in a totally
decentralized way.

If you can think of a more accurate way to describe human economic motives,
I'd like to hear it.

> has been disastrous for the working and middle classes all over the
> developed world.

Capitalism has lifted billions out of poverty. Sure, there's a large gap
between the richest and poorest, but the poorest people of the world are also
materially better off than at any other point in human history. I don't see
how this is a bad thing.

~~~
s73v3r_
That doesn't mean Capitalism can't do better. I'm extremely tired of this
"Capitalism did good things once! Why are you criticizing Capitalism?" trope
when talking about the very obvious flaws of it.

~~~
fbonetti
I agree. It's definitely not perfect, and I do view the rising inequality and
stagnant wages as a serious issue. I just find it alarming that when people
criticize capitalism, they usually advocate for some variety of full blown
socialism, which has been tried many times before and failed disastrously
every single time.

I don't know what the solution is. Every government intervention has the
potential to distort the market and create corrupt/perverse incentives. Rent
control is a great example of something that sounds nice on paper but ends up
increasing housing costs as a result. I'm generally in favor of expanding the
welfare state but I think we should be extremely cautious in doing so.

~~~
s73v3r_
"I just find it alarming that when people criticize capitalism, they usually
advocate for some variety of full blown socialism, which has been tried many
times before and failed disastrously every single time."

Scandinavia says hi. And those "disastrous" times you're talking about are
more the result of dictators, than any economic system used.

~~~
fbonetti
> Scandinavia says hi.

Idk, maybe I'm spending too much on the internet but it seems like the
discussion around inequality has shifted from "let's increase the welfare
state" to "let's dismantle capitalism and give socialism a try". There seem to
be a lot of people these days that call themselves Marxists or capital-S
Socialists, and even some who are apologists for the likes of Stalin and Mao.
These people are everywhere on Reddit and HackerNews.

I'm all for the Scandinavian model (which, to be clear, is capitalism with a
large welfare state and a sovereign wealth fund, not socialism), but do I want
a planned economy or a dictatorship of the proletariat? No, because it doesn't
work.

> And those "disastrous" times you're talking about are more the result of
> dictators, than any economic system used.

Socialists use this argument a lot but I can't think of a scenario in which
socialism doesn't eventually devolve into fascism. Even if the means of
production are owned by the workers, the workplaces are run democratically,
and resources are allocated by direct consensus, you'll still need to use
coercion to force people to participate in the economy. If people in village A
need more grain and the farmers in village B don't want to produce more grain,
do you point a gun to the farmers' heads and make them produce more grain?
Disagreements will still happen in Socialist societies. People will still
fundamentally be selfish. People will still want to barter with each other and
enrich themselves through their labor, intellect, and unique talents. How do
you seize peoples' property, prevent them from bartering and hoarding, and
force them to participate in a planned economy without a massive and violent
state apparatus?

The great thing about capitalism is that it recognizes the inherent self-
interestedness of human beings and channels it into something that is (mostly)
positive for society. Socialism starts with the premise that human beings
would behave in higher-minded way if only they had more economic power, which
I think is a flawed assumption and the reason why socialist economies will
always fail.

~~~
s73v3r_
"Idk, maybe I'm spending too much on the internet but it seems like the
discussion around inequality has shifted from "let's increase the welfare
state" to "let's dismantle capitalism and give socialism a try". "

Given how shitty capitalism is treating people right now, that's a pretty
valid viewpoint.

"There seem to be a lot of people these days that call themselves Marxists or
capital-S Socialists, and even some who are apologists for the likes of Stalin
and Mao. These people are everywhere on Reddit and HackerNews."

So what?

"Socialists use this argument a lot but I can't think of a scenario in which
socialism doesn't eventually devolve into fascism."

I can't really think of a scenario in which capitalism doesn't either.

"The great thing about capitalism is that it recognizes the inherent self-
interestedness of human beings and channels it into something that is (mostly)
positive for society."

This isn't a positive, and it does not channel it into positives for society.
Captialism encourages things like dumping waste into rivers. How is that a
positive for society?

------
close04
Getting a big payout is not the problem. Getting a big payout that's
disproportional to the company's performance or profitability is. Getting a
golden parachute while the plane is diving should not be an option.
Bonus/malus.

~~~
s73v3r_
Agreed. I'd wager that most people on this board, if they fuck up at their job
and get fired, are not going to get any kind of golden parachute. They're just
going to be kicked out on their ass.

------
eeZah7Ux
> Bezos ... took home $1.7m in 2017 while the average Amazon worker earned
> $28,446 - a ratio of 59-to-one.

The claim is highly misleading. Bezos owns a large amount of Amazon stocks.
The stock value growth is a huge extra to his salary.

~~~
Waterluvian
Which is pretty great way to bind Performance to compensation.

~~~
phil248
And a truly great way to exacerbate economic inequality.

------
locklock
What are the chances that this has anything to do with merit? It's just
another example of the same thing happening everywhere else in the American
economy: people who are already rich taking more and more money for
themselves, leaving much less for the rest of it. Of course there are people
whose job it is to tell us that yes, these CEOs actually deserve this and have
earned it, but that's just another part of the scam.

------
HugoDaniel
How do I become a US boss ?

~~~
xkcd-sucks
I became my own boss through a program called AmWay, and you can too. Email me
for details

~~~
selimthegrim
Even as a troll, that shit isn’t funny here. I’ve seen college students at
Tulane trying to “finance their education” by selling Cutco. These guys are
not from poor families.

------
Shivetya
I am still of the opinion that you need to look at the overall compensation of
the company versus how much the bosses are taking in. this type of comparison
can be made in many industries from sports to movies as well. there are always
people at the top of the food chain but for some reason we single out
corporate leaders rather than sports and movie stars. heck we could sit back
and compare the pay and benefits of the leaders in politics to the rank and
file at the bottom of their party or typing pools too.

my local university pays over a million plus benefits to its
chancellor/president, how does that compare to the cafeteria workers or
sanitation people of the university? a public funded university.

it is all perspective, you are being led by the nose to look everywhere but
behind the curtain. behind that curtain you will find many who want to slap
others with rules they will quietly excuse themselves from or word in such a
way as to miss them. it is exploitation of jealousy for political benefit

------
jeffreyrogers
I wonder what this looks like if you break it down by industry and firm size.
It seems odd that this sort of thing can persist (and increase) over time
since you'd expect competition within industries to drive this down over time.

~~~
dantheman
Just to flip your assumptions around here's an idea; no personal knowledge
here, just a potential alternate narrative.

Perhaps competition drives executives salaries faster than general workers.
There is intense competition for those who can have a large impact on the
bottom line. In tougher/faster paced competitive environment the demand for
qualified/experienced individuals must be intense.

~~~
maxerickson
I imagine much of the explanation is firm size growing.

You don't have to scrape out a lot of Walmart's revenues to get a huge salary.
You have to scrape out a pretty big chunk of the revenue of a 50 person firm
to get a large salary, never mind a huge one.

------
titzer
I'll be flamed or downvoted or both, but food for thought:

After a long time (most of my adult life) as a small-l libertarian believing
in the rationality of free markets, the rule of the invisible hand, and heck,
the sheer _morality_ of profitability, after seeing what wreckage that has
brought to societal institutions, the internet, the environment, and generally
speaking, what growthism has done to our ability to plan long-term as a
species, as nations, societies, and what selfishness and greed has led us all
to, I have gradually come to the conclusion that the world should institute an
overall personal wealth cap that _specifically_ targets the people at the top.
Concretely, I think that no human should be allowed to have personal assets of
more than $~100 million in any way, shape or form.

Yeah, I know, it's unworkable. Unfair! Impossible to enforce! It won't fix our
financial mess! It'll suppress growth and innovation! How do you expect people
to motivate themselves if they can't make a billion dollars!?

Well I'll humbly submit that anybody who feels driven to earn a billion
dollars--that's enough greenbacks that if you thumbed through them, one a
second every second of every single day of every day of the year, it'd take
you 30 years just to count them--has a severe mental illness called _greed_. A
billion dollars is 100 lifetimes of living 100 years at $100,000/yr living
standard. It's just insane to think that we're OK with this because they
"earned it". Horseshit. Jeff Bezos's $150 billion is _15,000 lifetimes_ worth.

Billionaires are accidents. They are artifacts of hierarchy that we endure,
cowed, because we don't have stomach to see how empty our souls are and _do
something about it_. No billionaire has ever earned 100 lifetimes of wealth.

~~~
guru4consulting
To put the 15,000 lifetimes in perspective... there has been 7,500 generations
of humans since the emergence of Homosapiens. Civilization started only 500
generations ago..

------
ratsz
The CEO of my company could give each of his 10,000 employees $1M and he'd
still have a higher net worth than all of them combined.

------
tribesman
it's the same story in football. I am an average player and Ronaldo makes a
lot of money, while i nearly went broke playing football.

Pretty, sure most people don't understand what it takes to be a good CEO, so
they'll be crying inequality. Inequality comes from the nature.

