Friday, May 2, 2014

Things ain't what they used to be for the average worker, but they're not all that different for the CEO...

Harold Meyerson uses the following to bolster the argument for California politicians who are looking to use the state's tax code to coerce corporations into reducing CEO pay (HT Don Boudreaux):
In the post-World War II decades of broadly shared prosperity, the men (they were almost always men) who ran America’s great companies made relatively low multiples of what their workers made. In 1965, the ratio was 20 to 1, according to studies by the Economic Policy Institute. By 2012, that ratio had risen to 273 to 1, though no one contends that today’s chief executives are 14 times better, or today’s workers 14 times worse, than those of 50 years ago.

Now, I don't know that CEOs aren't 14 times better today than those of 1965. I do, however, agree that today's workers are not 14 times worse than those of 1965. But, honestly, I find that to be an utterly useless (save for political purposes) statement.

So, let's ask a useful question (useful in terms of shedding proper light on the political ploy du jour): Are CEOs, and today's workers, 14 times (or to whatever degree) better off than those of 1965?

As for CEOs: Let's say that a multiple of 20 times the average worker's pay in 1965 meant an annual income of $93,000 for your average CEO. Clearly, $93,000 in 1965 bought a person an utterly fabulous material lifestyle. You name it: the latest, most expensive, technology, travel, tickets to sporting (etc.) events, cars, boats, gourmet food, etc., etc., etc. Today's CEOs do make substantially more money than those of 50 years ago, but do they enjoy more luxury? In terms of access to the amenities of the day, not dramatically. 

As for the average 1965 household: We're talking one black and white TV, limited travel and entertainment opportunities, one car per household, and, well, frankly, there's just not a whole lot to report. As for today's: We're talking flat screen high-defs with hundreds of viewing options, home computers, affordable travel, a world of information and entertainment in the palms of their hands, 2+ cars per household, etc., etc., etc. Clearly, while today's average worker makes a mere fraction of the income received by today's average CEO, he/she enjoys many times more the luxury than did the average worker of 1965---and has entirely trumped the CEO in terms of lifestyle gains over the past 50 years.

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