THE MISLEADING CLAIM: CEO pay keeps unfairly increasing! It’s 331 times larger than average worker pay!!!
Despite the common rhetoric regarding rich CEO’s supposedly getting richer and richer at the expense of average workers, did you know that average pay for CEOs in the S&P 500 actually declined from 2000-2011 and that median CEO pay for that same group remained relatively flat from 2002-2011? In fact, in recent history, S&P CEOs saw their pay increase during only the Clinton administration. Their pay’s relative stability under George W Bush, and even under Barack Obama, however, calls into question the common implication that unfair advancements in CEO pay are tied to conservative political ideology.
So why do people think CEO pay is growing wildly out of control? Well, because that’s what they’re being told. A large part of this misinformation comes from a commonly cited set of misleading statistics released by the AFL-CIO, which then shows up in articles such as IPS News, Daily Kos, and Progressive Values. Here is what the AFL-CIO claimed:
1. In 2013, "the CEO-to-worker pay ratio was 331:1." 2. In 2013, "the CEO-to-minimum-wage-worker pay ratio was 774:1.
This might be damning evidence against the current trends in CEO pay if it were actually true, but it is not. As the American Enterprise Institute points out, “…this frequently cited AFL-CIO analysis of CEO pay is an example of statistical bait-and-switch.” Here’s why:
The AFL-CIO is comparing the average salary for 350 of the highest paid US CEOs from 2013 to that of a select group of “production and non-supervisory workers.” This is significant for a few reasons. One, in 2013, there were actually 248,760 CEOs in total, and in 2014, there were 246,240. Their average pay, therefore, is drastically reduced when you do not intentionally focus on only the most lucrative bunch. Another reason this is entirely misleading is because those “production and non-supervisory workers” represent around only 8.5 million factory workers of the total 136.3 million payroll employees nationwide. Thus, the AFL-CIO figures ignored roughly 99.9% of all US CEOs and about 93.8% of all US workers, which is clearly a distortion of data designed to support a manufactured conclusion. As the AEI concludes, “it’s a completely bogus and meaningless comparison.”
Based on more comprehensive data, “the average CEO earned $178,400 in 2013 and the average worker earned $46,440 in 2013. The REAL CEO-to-worker pay ratio, therefore, was actually 3.84:1, NOT 331:1. Furthermore, the real CEO-to-worker pay ratio has not actually been increasing, as is frequently reported, but instead remained relatively steady over the last 12 years, averaging around 3.8:1.
And what about minimum wage?
In 2013, a full-time minimum wage worker earned $14,500. Therefore, the CEO-to-minimum-wage-worker pay ratio was 12.3:1. This, again, is WILDLY different from the inaccurate AFL-CIO number of 774:1 reported in numerous articles.
In conclusion, understand that CEO pay, regardless of whether you think it’s justified, has NOT significantly grown, the relative inequality between CEO and worker pay has NOT expanded, and the public was arguably lied to in a dishonest attempt to push a politically driven narrative.