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EXTRA! CEOs Earn More Than Us

from the magazine

EXTRA! CEOs Earn More Than Us

Winter 1999
Economy, finance, and budgets
The Social Order
Politics and law

Omigod, the union-backed Fiscal Policy Institute of New York, headed by former New York State Assembly staffer Frank Mauro, has established a shocking fact: the salary of chief executive officers exceeds the earnings of waitresses, cashiers, and janitors. In fact, there's a "vast discrepancy between CEO and worker pay," as their new study indignantly puts it. Now, it's truly astonishing that such a thing could happen in a political system whose constitution promises "from each according to his ability, to each according to his need." Oops, wait: wrong system—that's communism. Still, even if it's not in our constitution, surely there are means to end this gross injustice? Happily, the Fiscal Policy Institute—along with two national organizations, Jobs with Justice and the National Priorities Project—supplies us with "four practical strategies for closing the gap between CEO and worker pay."


We must increase the minimum wage and index it to inflation. Next, New York needs a law to make companies that receive public tax subsidies and contracts pay a so-called "living wage" to their workers. Third, workers must have guaranteed union representation. Last, federal legislation should punish companies whose executive compensation surpasses 25 times the pay of their lowest-paid full-time subordinate. If a company paid its workers the full "living wage" that the Fiscal Institute recommends—$36,583—the most its CEO could make without the firm being punished would be $914,575.


But the magnitude of a CEO's compensation isn't a function of the degree to which he exploits his workers, as the institute's analysis presumes. On the contrary, though some supine boards heap rewards on chief executives who don't perform, high salaries usually reward the good management and strategic innovation that make a company prosper—and protect its workers' jobs.


If the Fiscal Policy Institute truly believes that the level of workers' wages aren't higher than they are because CEOs are scooping up cash that should go to their employees, then why stop at a "living wage?" Instead of squashing CEO earnings so that they're closer to the level of ordinary workers, why not declare that everybody be paid CEO-level salaries? Why not make the minimum wage $1,000 per hour, so that everybody can be a millionaire? Oops, now there are no more jobs around. All the minimum wage does is tell us that it's illegal to employ anyone whose services are worth less than the minimum wage. Raise it, and you simply increase the number of workers whom companies are forbidden to hire.


If the Fiscal Policy Institute's strategies were ever put into practice, the cost of doing business in New York would become so cripplingly high that workers could enjoy the promise of opulent wages—but they'd never get a job.

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