Mark J. Perry:
In an annual ritual that takes place every May, the AFL-CIO releases its “Executive Paywatch” report to publicize what it considers to be the excessive compensation of the CEOs of America’s biggest multinational firms.
The nation’s largest labor federation reports this year that the typical CEO running an S & P 500 firm received total compensation of $12.4 million in 2015 while the average rank-and-file worker was paid just $36,875 — a pay gap of 335-to-1.
But the AFL-CIO can only get such an inflated pay ratio by applying a series of statistical sleights of hand that result in an invalid apples-to-oranges comparison of the total compensation for CEOs to the cash wages of mostly part-time workers.
To start, the AFL-CIO only considers a very small sample of S&P 500 CEOs to get its 335-to-1 ratio. Using a larger, more representative sample of CEOs produces a much smaller pay gap.
For example, the AFL-CIO’s own website reveals that the average CEO compensation of Russell 3000 companies was $5.7 million last year, which would cut the 335-1 ratio by more than half to only 155-to-1.
Further, BLS data show that there are actually more than 20,000 chief executives employed nationally who “manage companies and enterprises” at an average annual salary of $220,700. For that more comprehensive group of America’s CEOs, the CEO-to-worker pay ratio drops to only 6-to-1.
Then there’s the issue of average pay for rank-and-file workers. The AFL-CIO reports an annual pay figure of $36,875 in 2015 for the “average nonsupervisory worker,” but doesn’t provide any additional details.
Here are the details not provided by the AFL-CIO.
The $36,875 annual average worker pay for the 99 million “production and nonsupervisory employees” is based on an average hourly wage of $21.04 for rank-and-file workers in 2015, an average workweek of only 33.7 hours for those workers, and an assumption of 52 weeks of work per year. That’s how the AFL-CIO gets its reported annual pay for the average U.S. worker: $21.04 per hour x 33.7 hours per week x 52 weeks = $36,875.
So every year, to get the highest possible pay ratio, the AFL-CIO does a statistically deceptive comparison of the total compensation for only 500 CEOs who are working full-time and in their prime earning years to the cash wages only for 99 million rank-and-file workers who are mostly part-time workers. But you would never know that from the AFL-CIO’s website because the details of average worker pay are never fully explained.
How would the AFL-CIO’s outsized pay ratio change if we considered total compensation for both CEOs and full-time rank-and-file workers? To make the comparison as accurate as possible, let’s consider rank-and-file employees working a 50-hour week (even though most CEOs probably more than 50 hours a week) and receiving fringe benefits equal to 46% of their cash wages, which is the current estimate from the BLS for all workers.
The total annual compensation for rank-and-file workers would be nearly $72,000 and would result in a CEO-to-worker compensation ratio of only 172-to-1. In other words, the AFL-CIO’s reported CEO-to-worker pay ratio is inflated by a factor of almost two times by comparing the total compensation of CEOs to the average cash wages for part-time workers.
Beyond the statistical chicanery used to generate an inflated pay ratio, what’s the point of the AFL-CIO’s annual reports on CEO pay? The AFL-CIO tells us that although America is supposed to a land of opportunity, the rising CEO-to-worker pay gap means that “corporate CEOs have been taking a greater share of the economic pie” while wages have stagnated for the average worker. The message is that if CEOs weren’t being so generously compensated then rank-and-file workers would be making higher wages rather than getting only the leftover scraps.
Let’s do a little experiment: The S&P 500 CEOs received $6.2 billion as a group in total compensation in 2015. If the AFL-CIO could confiscate that entire amount and redistribute it to the rank-and-file workers, how would that affect average worker pay?
Hillary perpetuates this lie often:
In March of 2016 Hillary Clinton said this:
Then we learned that Goldman-Sachs paid Hillary Clinton more for one 20-minute long speech than kindergarten teachers make in 15 years!
Seems like this is true:
Hillary is filthy rich.
Hillary is white.
Hillary calls herself a Christian.
Hillary gets HUGE donations from big corporations.
Hillary voted for the Iraq war.
IOW, Hillary is all of the things liberals hate.
Yet she is the only one they want!
Sick, sick, sick.
What is the pay gap between these rank and file workers and AFL-CIO officers?
They’re telling you that it’s part of the picture, because it most definitely is. It’s part of a system that can provide enormous short-term rewards to a few, for making decisions that ultimately have lasting, highly negative consequences for many. If you don’t believe that’s so, you haven’t been paying attention for the past 20 years.
Hey, it’s all the fault of democrats and unions, right? Even though democrats have controlled Congress during only 4 of the past 22 years, and union workers represent only 11.1 percent of the workforce.
@Greg:
For what is there fault? What is being pointed out is a lie perpetrated by a union. Yes, that IS the fault of the union and Democrats help perpetrate the lie because the unions flood the Democrats with the dues wrested from the member’s hands.
Aside from all the spin and distorted figures, reality doesn’t support the pay gap as a Union supported myth.
In 1979 I made $14.05 an hour as a union construction worker on a federally funded power plant, At the time, you could buy a new Ford Explorer or Chevy Silverado that would turn every head in the neighborhood for 9K. In the early 80s I made around $13 an hour as an electrician at a unionized appliance factory (manufacturing usually paid considerably less than construction as it offered consistent work). I bought a 3 bedroom home on a 10 acre farm for 28K (sold it 10 years later for $45K).
Today I contract for several manufactures. Production wages range from $14 an hour to around $23. Skilled trades range from $15 to $28. You generally see the lower pay in non-union plants although bargaining plants are sometimes low as well. In the Louisville Ford plant, production tops out at about $28 an hour (they haven’t had a raise in 10 years and have taken hits on health insurance, retirement, 401K, etc. while I priced a new F250 the other day at $85K).
The pay hasn’t just been limited to hourly or bargaining employees. An electrical engineer starts out at around $65K and it takes around 5 years to hit $80 to $90K.
The automotive industry, steel and aluminum, and union and/or prevailing wage construction are usually the higher end pay, what was once considered possibly “middle class”. Tyson and Purdue Poultry processing plants pay around $10 to $12 an hour as does many other industries. I understand the banking industry (which I have little to do with) pays around $10. A new factory advertising at $15 would likely be overwhelmed with applications.
Unions have had an intense uphill fight at a time in history of propaganda and wealth redistributed towards the top. They are losing the ability to represent from a very corporate friendly/labor hostile Congress (we saw this in the TN Volkswagen plant).
The more bargaining rights decline, not only does lower pay and weakened benefits follow, but the burden is put on your $20+ workers to subsidize the lower paid full time workers with food stamps, medical, and on and on-something union bashers and pay inequality deniers refuse to acknowledge.
@Bill:
That was my first thought as well. They’d also have to add in all the perqs and benefits. I wonder just how big THAT income gap would be?
@Ajay42302: Where I work, non-union skilled craftsmen earn $25-35 an hour. Often, the make more than middle management.
@Bill:
That $25-35 is reasonably consistent with what I’ve seen. $26-$28 for a journeyman tool & die maker, mechanic, electrician, instrumentation, ect is the norm while some do pay in the low to mid 30s. Those that pay in the in the $15-$20 generally depend on their engineers for troubleshooting and the more advanced problems. Once these apprentices acquire the skills, they move on to better paying employers.
I’m not aware of your employer but there are variables such as the demand for skill trades in your area, the desire to keep unions out, the quality of skill needed for that process, ect.
But $30 an hour($60K a year) for a man or woman who spent 2 to 3 years in school (at a cost of about $30K while earning no wage at all) and then another 3 to 5 years to reach the skill level in today’s economy is a pretty piss poor wage-in my opinion.
@Bill:
Does it really matter if the ratio is 330-to-1 or 155-to-1? When a CEO is raking in tens of millions each year with his options and what-not, has his own jet, yacht, off-shore accounts, homes scattered about and a golden parachute while his employees are teetering at the edge of bankruptcy, there IS a measure of obscene in play.
Even MORE obscene is when a person can work a 40-hour week and remain well below the poverty level, providing more than a little bit of incentive NOT to figure out how to do better, but instead how to break the law and take the easy way out.
@George Wells: Do you even know what a CEO is responsible for? What kind of CEO would you get for $50 an hour?
@Bill:
I’m not exactly sure of your meaning of “wrested from the members hands” but this is a common myth or misconception of union bashers, that unions hike up dues in order to donate to their candidate with no regard to the member’s wishes. To be clear, federal law and state laws prohibit unions from using dues dollars to make contributions to political campaigns. Rather, unions have political action committees (PAC) which are strictly voluntary. This is accomplished through drives to solicit voluntary PAC donations or to ask for a voluntary payroll deduction.
@Bill:
I’m not finding in the above readings nor do I know of anyone advocating a $50 an hour pay for CEOs. When you fluff your arguments with such nonsensical rhetoric, it makes you appear more as a distracting kibitzer attempting to derail the discussion due to a lack of argumentative substance.
But I’ve notice that stratagem is somewhat overplayed here so you’re not alone my friend.
@Bill #10:
I’m fully aware of what a CEO does, and I’m comfortable about CEO pay being way higher than workers’ wages. MY POINT was that there IS a “wage gap” between CEO pay and workers’ compensation – that the “pay gap” is NOT a “MYTH” like the author contended. What nonsense! Curt just stirs the pot for fun, posting articles like Perry’s whose premise was a concoction of pseudo-logic and nonsensical conspiracy theory that didn’t add up to a valid argument. What, exactly, IS his point? That CEOs’ and workers’ pay is identical? Of course not. But then did he offer a “pay gap” metric that HE accepts? No again. Curt just put out some rotten bait, and you bit on it. If you’re wondering what that awful taste in your mouth is…
@George Wells: Yet, as with all things liberal, if the case is so clear and so unfair, why does the left feel they have to LIE about the matter?
@Bill #13:
Good.
Ignore my question.
What was the point of this article? That there is more than one way to look at CEO pay, or that all CEOs are not paid the same? There IS a “pay gap.” So what?
Why are you so angry ALL THE TIME?
@George Wells:
There seems to be a binary conclusion from many Obama and Dem bashers that something or some policy (mainly anything supported by Democrats) is utterly bad and must be removed. And building and maintaining that position with illogical gibberish and manipulated word salad is fair game. They don’t do an objective analysis but instead, they cherry pick for context. They disregard reality and simply invent their own. And it doesn’t matter how profoundly destructive it is (never mind the real and true pay inequality escalating today- never mind overwhelming evidence of climate change- never mind how the GOP trickle down policy has been an abject failure hence; Kansas is burning as we speak but uh, never mind that- never mind the ramifications of defunding many gov agencies, never mind that ACA didn’t kill grandmas or jobs or create long lines or ship all the doctors out of the country-never mind that major companies of the top wealth are now the new welfare recipients and actually using middle class workers to subsidize their low paid full time employees- etc. etc.), they continue to bang head on desk and regurgitate the same worn out myths or comb the Internet for something glittery to support the snake oil. Counter arguments and reality have no place in that world.
Henry Ford wanted everyone to buy a model t his workers were paid enough to afford one 5 bucks a day!
at 85K for a new truck the average assembly line worker cannot afford a new truck.(my favorite bumper sticker..”yes this is my Truck, no I wont help you move”)
As far as the wage gap, big deal, envy is not a virtue.
Many factory and mill workers make more than the salary office bees. But the office Bees have AC, clean working conditions, and after 8, 12 or 16 are not waiting on a relief to take over their computer to keep things rolling.
The ceos did not drive the cost of everything nutz, government regulations did.
The gas milage demands have killed more people and the higher that number goes the lighter and more unsafe these autos become.
http://theexpiredmeter.com/2012/08/the-unitended-consequences-of-higher-
@George Wells: I didn’t ignore your question. The article is based on a LIE… as is a common practice among liberals. The leftis arguments for gun control, gay rights, abortion, welfare are always (ALWAYS) based on lies which invent victims, villains and exaggerate the problem. This post is no different.
How does one debate a lie?