The CEO-to-worker pay gap is widening yet again, as top executives who took pandemic pay cuts more than recovered lost earnings in the last year.
CEOs made 254 times more than the average worker in 2021, up 7% from the year prior, according to the Equilar 100, which offers an early look at CEO compensation among the largest companies by revenue that filed 2021 proxy statements by March 31.
In 2021, median CEO compensation reached $20 million, a 31% increase from the year prior, due to big jumps in stock awards and cash bonuses based on market performance and company productivity. CEO pay consists of wages, as well as extremely lucrative bonuses, long-term incentives and, most importantly, stock options, which comprise around 85% of CEO compensation, according to Lawrence Mishel, a distinguished fellow at the Economic Policy Institute.
For comparison, CEO pay decreased by just 1.6% between 2019 and 2020 due to pandemic cuts, from $15.7 million to $15.5 million.
Median worker compensation at Equilar 100 companies rose from $68,935 in 2020 to $71,869 in 2021, a roughly 4% increase. Equilar says this bump is due in part to companies that offered bonuses and other cash payouts in the recovering pandemic economy that saw increased consumer demand and a tightened supply of workers.
The widening gap shows the benefits of corporate profits stay at the top while “workers, many of whom are on the frontlines of the crisis, have not been reaping the rewards,” Sarah Anderson, an executive compensation expert at the progressive think tank Institute for Policy Studies, told CNBC.
“They really just let loose in 2021 and were focused on keeping their executives happy and not worrying as much about what was happening on the worker end,” she said. “In the long run, and even in the short run, it’s not going to be good for the bottom line.”
The Economic Policy Institute estimates CEO pay has increased by 1,322% since 1978, compared with an 18% bump for the typical worker over this time period.
Typical worker wages have not increased as fast as CEO pay for a number of reasons, Mishel says: high unemployment, globalization, the erosion of unions, low labor standards, the increase in non-compete clauses and domestic outsourcing, like shifting to a workforce of freelancers.
Worker pay increased by about 5% in the last year, to $31.58 an hour, according to U.S. Department of Labor data. But wage growth appears to be slowing down while everyday costs continue to increase — the consumer price index rose to 8.5% in March. Meanwhile, at the end of 2021 companies said they were setting aside 3.9% of their payroll budgets to raises, according to a November Conference Board survey representing more than 10,000 workers.
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