BUSINESS
07/12/2016 01:43 pm ET

1 Obscene Statistic Helps Explain Why Income Inequality Is So Bad

Prepare to cringe.

Chief executives certainly have demanding jobs ― requiring long hours, boorish appearances on CNBC and earnest declarations of their social commitment ― but are these positions 276 times as hard as yours?

In 2015, the average chief executive at the largest corporations in the U.S. earned 276 times what a typical worker made ― about $15 million, a new paper from the Economic Policy Institute reports.

The number actually fell a bit from 2014 ― when CEOs on average made around $16 million ― because of declines in the stock market. Still the ratio of CEO pay to normal person pay remains so high it’s almost kind of funny ― except for how that money could be put to more productive uses.

The ratio was 59-1 in 1989, then surged in the 1990s to 376 before the dot com crash. Right before the financial crisis in 2007 it was 345-1.

EPI

EPI looked at the CEOs at the top 350 U.S. public companies and considered salary, bonus, cash incentives and money earned from exercising stock options.

CEO pay has risen along with the income of other members of the top 1 percent of earners in the U.S., while the incomes of everyone else have stayed fairly flat. This rising inequality has been a key talking point for Vermont Senator Bernie Sanders in his recent popular though unsuccessful bid for the Democratic presidential nomination.

In recent months, a few large companies with highly paid CEOs have announced raises for their lowest-paid workers. Most recently, JPMorgan Chase CEO Jamie Dimon announced in a New York Times op-ed that the bank is giving raises to its lowest-paid workers, who make $10.15 an hour. Over the next three years, these people will see their pay go up to between $12 and $16.50. 

Dimon himself got a 35 percent raise recently, as The Huffington Post’s Ben Walsh reported. He made $27 million in 2015.

Some argue that pointing out the obscenely high pay of CEOs is meaningless ― it’s a juicy headline number but doesn’t really impact the average American. EPI makes the opposite case, arguing that CEO pay has essentially become a tax on the rest of us. All that money could be put to better use.

The paper recommends reinstating higher tax rates at the very top, setting higher corporate tax rates for companies that have higher ratios of CEO-to-worker pay, among other solutions to reinstate the balance. 

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