BUSINESS
06/26/2013 04:08 pm ET

CEOs Paid 273 Times More Than Workers In 2012: Study

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The average CEO makes hundreds of times what the average worker makes. And the average CEO probably didn't earn it all.

The average chief executive of one of the 350 biggest U.S. companies made about $14.07 million in 2012, including exercised stock options, according to a study by the Economic Policy Institute, a left-leaning think tank. In contrast, the average national pay for a non-supervisory worker was $51,200 last year. That means that in a typical top-350 company, the CEO made 273 times more than worker drones, by the EPI's estimate.

Back in 1965, CEOs were paid just 20 times more than workers, rising to 29 times more in 1978, according to the EPI. By the year 2000, the CEO pay advantage had peaked at 383 times worker pay. The ratio fell after the dot-com bubble and the financial crisis, but has been rebounding steadily since 2009.

The CEOs in the study got an average raise of 12.7 percent last year, EPI found. The average worker, in contrast, got a raise of, hmm, let's see here ... nothing. You got no raise. In fact, the national average for worker pay fell by about $300.

In fact, since 2009, average CEO pay is up 37 percent, while average worker pay has shrunk by 0.6 percent. Since 1978, CEO pay is up 876 percent, compared with -- gulp! -- a pitiful 5.4 percent gain for the average worker, according to the EPI.

Et voila, income inequality. The numbers may not match up perfectly, but this study jibes with other recent findings that the pay advantage of CEOs has ballooned in recent decades. By another measure, CEOs are paid 354 times what the average worker makes.

This study also is the latest in a flurry of EPI reports in response to Harvard economist Greg Mankiw's recent paper, "Defending The One Percent," also known as the "Liberal Economist/Blogger Full Employment Act Of 2013." In his paper, Mankiw essentially argues that, sure, OK, income inequality has widened in recent decades, but it's fine because the super-wealthy have earned all of their money because they are better and more productive than the rest of you rabble.

Paul Krugman and other economists have torn Mankiw's paper to shreds, but few have approached this delightful task with the rigor of the EPI. Last week, the think tank fired back with a paper pointing out that bankers and CEOs accounted for most of the dramatic rise in income inequality in recent decades, and argued that these bankers and CEOs were mostly riding on the coattails of soaring markets and lax financial regulation, and other stuff that adds nothing to the economy or society.

On Tuesday, the EPI released a separate paper pointing out that the income advantage of the top 1 percent of earners has been much higher than that of college graduates for most of the past two decades. This is evidence that the top 1 percent are simply milking money out of financial markets, rather than thriving because of their skills.

The EPI's latest paper suggests CEOs don't necessarily deserve their 273-fold pay advantage simply because they have some magical company-running skill. As evidence, the EPI cites the fact that CEO income has risen far more quickly than the income of other highly paid workers.

If CEO pay were all about skill, then it should track that of other highly paid workers. Instead, CEO pay has risen and fallen in lock-step with the stock market. CEOs in 2010 were paid nearly five times as much as workers in the top 0.1 percent of all earners, according to the EPI, an advantage that nearly doubled since 1989.

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