Financial security

As CEO salaries soar over 25%, financial security falters for workers

  • The pay gap between CEOs and their employees continues to grow.
  • A recent report reveals that the median salary of employees did not keep pace with inflation in 2021.
  • Director of Human Resources at Digital Marketing Holdings Mark Schell expands on this wage disparity and how it affects the future of work.

The pay gap between CEOs and employees continues to widen, despite overwhelming reactions from low-wage employees.

In one year during the pandemic, CEOs got an average of “29% raises as their median salary dropped 2%,” the Institute for Policy Studies (IPS) found.

In 2021, CEOs of companies with the lowest paid staff earned an average of $10.6 million while the median worker earned $23,968, the report finds.

In fact, IPS found that the average gap between the CEO’s salary and that of the median worker in their 2021 sample “jumped to 670 to 1, from 604 to 1 in 2020”, with 49 companies having ratios greater than 1,000 to 1.

According to this report, the automotive, restaurant and leisure, housewares and apparel, healthcare providers and internet industries – the companies that employ a greater number of workers at low pay – have the largest pay gap ratios.

Many are looking for ways to end this disparity from its current expansion. From excise tax bills to CEO compensation caps, proposed solutions to closing the gap are gaining traction in Washington, D.C. benefitspro wrote.

In this way, these disparities will affect the future of work, because “compensation levels are an indicator for people of how a CEO is treated versus how workers are treated in a company”, Alison Omens, Chief Strategy Officer of JUST Capital, told Forbes.

For more on this gap, Mark Schell, Director of Human Resources at Digital Marketing Holdingsexplains how this has grown over time and what it could mean for the future of work.

Allwork.Space: What can be done to reduce the growing pay gap?

Mark Schell: The pay gap between CEOs and workers in the United States is staggering. That said, and this may be provocative, do the high CEO salaries of Fortune 500 companies have an impact on what is paid to a typical worker at these companies? Does a staff accountant earn a lower salary because of what the board pays the CEO? I see no evidence to support this claim, and I have never professionally been part of a conversation that reflects on this action.

I think an important part of this whole equation is to consider the impact this gap has on women and BIPOC pay. These groups represent a disproportionately large share of low-wage workers and, conversely, hold a small share of C-level leadership roles. In my view, companies that are focused on making meaningful long-term progress in this area are a nobler effort to reduce income and wealth inequality.

However, if we were to focus on what steps could be taken to reduce the growing wage gap, I think it would have to come through federal regulation. Perhaps making tax incentives available to companies that maintain a “desired” CEO-to-worker pay ratio or, conversely, imposing tax penalties on those that do not could have an impact.

Allwork.Space: Is it good for companies somehow to do this, because it makes them appear profitable enough to pay huge sums to their executives?

Mark Schell: Over the past 18 months, the job market has become fiercely competitive, and CEOs are no different from other job seekers. They want to be paid competitively and fairly for the work they do, comparatively.

I don’t think any reasonable person can argue that their respective value to the organization is six hundred times the contributions of an employee as a whole, but to reiterate, I also don’t think employee compensation is necessarily altered by CEO salaries or intentionally kept lower to improve profitability.

Allwork.Space: What are the predictions for this in the future of work?

Mark Schell: Workers’ compensation, in some cases, will increase, especially for the most specialized and rare skills. A more likely scenario, with the flexibility of remote work, is that individuals might consider moving to a market with a lower cost of living to increase the value of dollars earned.

But you can expect that over time, companies will continue to monitor labor costs closely and make a concerted effort to move towards automating certain jobs and workforce solutions. work offshore when possible to remain competitive.

Chief Customer Officer at Adzuna Paul Lewis speculates what the future of this gap might look like for CEOs and workers:

Allwork.Space: Is there any chance it will get better?

Paul Lewis: According to a survey by Just Capital, the vast majority of Americans think CEOs are overpaid. With growing pressure on businesses to be ethical from job seekers, consumers and the government, things will have to change to create a foundation of transparency, trust and loyalty.

This is something Gen Z values; According to a Sezzle survey, 90% of Gen Z respondents believe companies should take action on social and environmental issues and 75% will research to see if a company is honest when taking a stand on issues. In the era of the Great Resignation, companies will need to improve pay rates, especially for lower-paid workers, in order to attract and retain the staff they need to succeed.

Allwork.Space: Will the gap continue to widen?

Paul Lewis: The gap has widened considerably and it looks like it will only continue to widen. In the 1950s, a typical CEO earned 20 times the salary of his average worker, a far cry from today’s environment with ratios between analyzed companies of 670 to 1.

Things can get worse before they get better. But the current economic climate – high inflation, high worker turnover, cost of living crisis, etc. – could create a tipping point where companies need to re-evaluate how they fairly compensate their employees in order to close staffing gaps. There is growing outrage around the CEO-employee pay gap, which could likely lead to a bigger wave of unionization and potentially worker protest.

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