Economy
Emmanuel Dunand/AFP/Getty Images

CEO pay up by 937% since 1978. That of the typical worker? 10.2%

The Economic Policy Institute says executive pay has far outpaced other economic markers, including stock prices

CEO compensation has increased by 937 percent over the last three decades, according to a new study. The rise compares with a dismal 10.2 percent hike for the average U.S. worker over the same time frame, putting into stark contrast the relative fortunes of the superrich and everyday employees in an increasingly economically divided America.

The report, released by the Economic Policy Institute on Thursday, found that average CEO compensation, which includes stock bonuses, was $15.2 million in 2013, up 2.8 percent from 2012 and 21.7 percent since 2010. That increase follows a trend since 1978 of CEO pay outpacing other economic growth factors. EPI says the 937 percent rise in pay is more than double the rate that the stock market grew in the same years.

The mismatched pace between CEOs and the typical worker means that CEOs earned on average $295 for every dollar their employees earned in 2013.

The report is based on an analysis of a database of CEO pay for the largest 350 public companies in the U.S. from 1978 to 2013.

Numerous studies have outlined the growing divide between America’s rich and poor, in which stock prices continue to climb past their pre-recession peaks, even as tens of millions struggle to make ends meet.

EPI’s report shows that CEOs are not only pulling away from average workers, but from other highly paid ones as well. Research found that average CEO pay was 4.75 times greater in 2012 than the typical earnings of others within the top 0.1 percent of the economy, suggesting that CEO compensation has been untied from the market forces governing the vast majority of American workers, even those making millions a year.

Despite the continued increase in pay since 2010, average CEO pay is still lower than it was in 2000, right before 2001’s stock market crash, and lower than in 2007, when it averaged $18.5 million, right before the global economic crisis.

The study’s authors posit that the continued rise in CEO pay has dramatic consequences for inequality in the U.S. They say that because the highest-paid CEOs tend to pay their executives more while keeping worker pay stagnant, increases in CEO pay drive wealth to the top 1 percent of earners. And because top earners tend to invest in the stock market, increasing CEO pay can also further concentrate wealth in assets that will never be accessible to average Americans.

“It is sometimes thought that the rise of CEO compensation is a symbolic issue and does not have consequences for the vast majority [of people],” the authors wrote. “However, escalating CEO compensation and, correspondingly, executive compensation more generally, have fueled the growth of the top 1 percent.”

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