06 May 2023

Two hundred and eighty-eight to one

Our country continues to degenerate toward levels of inequality more associated with the France of Louis XVI than with a modern free and democratic society.  This report at Common Dreams has the latest, with many infuriating details; the standout figure for me is that the median ratio of CEO pay to worker pay is now 288-to-1.  That's up substantially from 254-to-1 just a year ago, and represents a fundamental change compared to the 20-to-1 which prevailed in the 1960s, when middle-class workers made enough money relative to prevailing costs to buy a house and put three or four children through college on a single income.

Inflation-adjusted incomes for most US workers have been almost stagnant for about forty years (that covers my own entire working life) even as productivity has shot up.  How is that possible?  The richest one percent, the class that includes most CEOs and major stockholders at their corporations, skimmed off the extra wealth all those millions of workers produced, in the form of ever-more-obscene pay packets, bonuses, stock options, and golden parachutes.  While more and more ordinary Americans now struggle to get by from paycheck to paycheck, and could hardly dream of owning a house or putting children through college (or, in some cases, of affording children at all), the parasite class lives in a world of yachts and private jets and multiple palatial houses, as far removed from the world you and I inhabit as the life of Louis XVI was from that of the average French peasant of his time.

Is there any sense in which these people are earning all that money?  It is absurd to even ask the question.  Of course the median CEO is not working 288 times harder than the median American worker.  Most of them would suffer a complete breakdown if they had to labor through one ordinary work day of a fast-food employee or Amazon warehouse worker.  I'm frankly skeptical that top corporate executives do anything really vital at all.  I have worked at companies where the CEO or CFO position was vacant for six months or a year while an exhaustive search was conducted for the "right" person.  The business of the company continued on, not visibly affected at all by the vacancy of the august executive seat.  If the receptionist quit, they brought in a temp the same day, because that job actually does something and they couldn't make do without it.

One could also compare the US to other successful market economies like Japan and European nations, where the pay ratio is twenty or thirty to one, not 288 to one.  Is the median US CEO really a dozen times harder-working or more effective than the median Japanese or European CEO?  It's laughable.

The richest of the rich, people like Bezos and Musk, are inevitably the most visible to society because the media follow their antics as if they were some sort of celebrities.  They have wealth in the tens or hundreds of billions, yet it's painfully obvious that they are not unusually skilled or intelligent.  On the contrary, many of them are barely competent (see Musk's floundering at Twitter and his constantly-exploding cars and rockets), and so socially inept that they could barely survive if they were forced to live as ordinary people, without wealth and privilege to shield them from the consequences of their behavior.  In most cases, they were just born lucky and/or got in on the ground floor of some emerging technology or business model which would have appeared and developed with or without them, then built up their wealth to obscene levels by exploiting workers to the absolute limit of what the law would allow.

I do recognize, by the way, that there are some very wealthy people who truly did earn what they have.  Artistic creatives like JK Rowling or Taylor Swift genuinely did create things which could not have existed without them, things tens of millions of people found pleasurable enough to pay for.  They did not get where they are today by grinding down and underpaying vast numbers of sweatshop employees who do all the actual work, nor by lobbying politicians to give them unfair advantages over competitors, nor by cozy arrangements of sitting on each other's boards of directors and voting each other ridiculous salaries and stock options.  They represent honorable success on the old textbook model of how a free market is supposed to work.  But they are not typical of most of the one percent.

There's no mystery about how to fix this problem.  If we could return marginal tax rates to where they were in the fifties and sixties, when the economy was booming steadily and the rising tide truly did lift all boats, and if we could impose wealth taxes of similar impact, then we could begin to redistribute these monstrous mountains of wealth back to those who actually created them.  It just isn't politically possible, because we now have one party which is determined to cut and cut and cut what rags of a social safety net we have and grind down half the American people to Third World levels of degradation and desperation rather than rescind any of the endless tax cuts which now have many billionaires paying a lower effective tax rate that the typical waitress or secretary -- and another party which is itself half captured by the one percent and most of whose leaders are too timid to talk bluntly and honestly about the problem.

The new wave of labor activism we see today is the most promising development on the horizon, but to really change the direction of the country, that movement will need to grow large and strong enough to dominate the Democratic party and transform it into a true party of the working class, something it has not been for generations, and get rid of all the identity politics and gun-grabbery and woke-ism and general distraction and clutter that bog the party down and make it culturally toxic to vast regions of the country.  It will be a gigantic task.


Blogger Martha said...

The level of greed has reached obscene levels. I don't know how people manage these days, especially households with children. People need to unite on this common front and make (demand) the necessary changes. As long as we keep being divided, the rich will get richer and the rest will keep getting poorer. Something has to give at some point.

06 May, 2023 05:35  
Anonymous rick shapiro said...

Note that it's not necessary to grant the exception for people who really do create something
valuable that wouldn't have existed without them. They certainly deserve do earn rewards, and we all need to materially encourage their endeavors; but we also must realize that phenomenal wealth can accrue to their efforts only because of the existence of a mass of potential customers, not to mention network effects and protection of their wealth by the justice system. They, as well as all other wealthy people, should be subject to progressive taxation, in order to give back to society for the opportunities that society has given them.

06 May, 2023 08:44  
Blogger Infidel753 said...

Martha: Unfortunately the enemy has a lot of ways to keep people divided. In the US, race is one of the most effective ones.

Rick: Certainly artistic creatives shouldn't be exempt from progressive taxation, nor did I imply that. Rowling herself has been outspoken about this. My point was that they're different in having actually personally created something that's worth the money they made from it, unlike Musks and Bezoi of the world, who mostly generate income by exploiting the labor of others.

06 May, 2023 08:56  
Blogger Bruce said...

"If the receptionist quit, they brought in a temp the same day, because that job actually does something and they couldn't make do without it."
This is one of the first revelations that I had when I started working 55 years ago. The receptionist, the first contact, the face of your company, was always, always the lowest paid body in the house.

06 May, 2023 10:11  
Blogger Mary Kirkland said...

It's so sad that so many people are working full time and can't even afford to live by themselves because everything is so expensive. My daughter lives with me because even making $15 an hour isn't enough to rent a 1 bedroom apartment and pay all the other bills.

06 May, 2023 13:50  
Blogger Infidel753 said...

Bruce: Not surprising, frankly, based on what I've seen of how these things work.

Mary K: It's ridiculous. People keep saying this is the richest country in the world, and even people who work hard and make decent money can't afford what used to be considered a normal life.

07 May, 2023 01:18  
Blogger Daal said...

I envy other countries with better social policies - & really, I don't think they pay all that much more taxes, especially considering that they get more for their money

08 May, 2023 22:44  
Blogger Infidel753 said...

In most cases, they don't pay as much more than we do as one might think. The tax structures are heavily skewed to higher rates for the wealthy -- as used to be the case here.

09 May, 2023 00:31  
Blogger NickM said...

Whilst I agree in principle... There are other things...

1. A major issue here in the UK is with NHS pay/conditions which is grossly wrong. Senior and managerial staff are well (usually very well) paid but the frontline grunts in doctoring and nursing are not. It is almost like a medieval guild system. This has many repercussions. And that is in a state-funded system.

2. There is a difference between the earnings of a hired CEO and those of the company owner/founder. It is really not the same thing. The first is a corporate expense in just the same way as paying the guys who mop the floors is. The second is profit. I don't have any issue with the later. I do with the former. To put it another way. If I were to set up a company and it goes great and makes me a mint then that's fine. What isn't is if my employees are not equitably treated with respect to each other. Senior execs and such at Apple are paid top dollar. The folk who actually build their stuff in China are virtually slaves. They will never be able to afford an iPhone. How shockingly different from the vision of arch-capitalist Henry Ford!

3. I'm not sure about the comparison between the USA and Japan/Europe. I really don't know but is it possible that the remuneration packages may take different forms? Cold hard cash is one thing, share options etc. are another. I suspect because of things like that a direct comparison between different corporate cultures is difficult. Especially when talking about a very small subset of the population.

Yes, there is a huge issue in wage structuring and there needs to be a flattening of the curve - which you very rightly point out is a highly difficult thing to bring about. But it is not just about capitalism (see point 1). It is also cultural. Things like the false dichotomy of "skilled" and "unskilled" work which is jsut the class system wearing different clothes.

I think the solution is afFordism. Just like Henry Ford (I'm not idolising him - that was Aldous Huxley's job - and Ford was a git in many ways) but his idea of worker as consumer is brilliant. It is win-win.

10 May, 2023 03:48  
Blogger Infidel753 said...

It's usually the case that upper management, not only the CEO, gets much better paid than the actual workers. If that occurs in state-funded systems as well as corporations -- and I'm sure it does in many cases, in the US as well as the UK -- then it needs to be addressed there just as much as in the corporations. I don't think the pay differentials are so extreme in the public sector, though.

There is a difference between the earnings of a hired CEO and those of the company owner/founder. It is really not the same thing

Yes it is. Once a business gets big enough that it has dozens or hundreds or thousands of employees, then they are doing most of the work and producing most of the value, and should receive most of the revenue generated by the value they are creating. Whether the guy at the top is the original founder or got hired into the position later, doesn't make any difference to that. It's still the workers who generate most of the value.

about the comparison between the USA and Japan/Europe. I really don't know but is it possible that the remuneration packages may take different forms? Cold hard cash is one thing, share options etc. are another

Pretty sure these comparisons take that into account -- I mentioned in the post that a lot of that huge CEO income takes the form of stock options, for example. It's routine to assess the total value of the entire package. That's how a fair comparison is possible.

I never mentioned capitalism in the post. I'm sure there were huge differences in income between upper bosses and actual workers in the USSR, for example. They also had a parasitic ruling class which expropriated a lot of the value the workers produced, they just did it by different methods under a different system. That will always happen one way or another unless active steps are taken to prevent it. I wasn't interested in this post in talking about capitalism vs socialism or whatever. The point is to distribute income more in accordance with who produces it, regardless of the system. Democracy should actually be a better system for doing that (regardless of the economic system) since the politicians who control taxation rates and social benefits are at least in theory accountable to the people via their votes.

Any company could adopt Ford's view that workers need to be well-paid so they can buy the company's products. Almost none do. We can't just wait for corporations to adopt better policies. The state and the unions need to act to force change -- that's a big part of their reason for existing at all -- and in the US at least, the former is currently asleep at the switch.

10 May, 2023 06:15  
Anonymous Annie said...

Infidel: I'm wondering if you've changed your view of the Democrats' being beholden to the one percent since the passage of the Inflation Reduction Act, which (among other good things like reducing the cost of insulin and combating climate change) strives to make our tax system more equitable by focusing on the wealthy and gives the IRS the funds to do this scrutiny. That significant bill was passed by the Democrats alone--and the Republicans want to remove the IRS funding.

I continue to believe that Biden's plans and actions to build the economy "from the middle out" rather than "from the top down" can have real impact on closing the obscene wealth gaps in our country--and they are a big factor in the opposition to his reelection. With the exceptions of Manchin and Sinema, he's had solid Democratic support. The parts of Build Back Better that they blocked would enabled the Democrats to do much more.

30 December, 2023 10:41  
Blogger Infidel753 said...

Those policies have done some good, but they're just tinkering around the edges compared with what's needed. Bezos and Musk and the other oligarchs are still piling up obscene mountains of wealth, while millions of people in full-time jobs are still struggling to afford decent apartments or even survive on any decent level. Where are the Democratic leaders demanding rollbacks of the last half-century of tax cuts that produced this disaster, and returning the stolen trillions directly to the working class that created that wealth? Where is the full-throated party support for workers struggling to preserve work-from-home against the bosses' efforts to drag them back to offices? Where are the thunderous denunciations of Amazon's abuses of its workers, the all-out campaign to break it up and end its dangerous monopoly position in the economy? Where are the demands for a $20-an-hour minimum wage (in line with what most civilized countries have) to at least enlarge the crumbs the workers get from what they produce before the parasite class gobbles up most of it?

Oh, I know that none of these things could be implemented as policy with the Republicans controlling the House and the Democrats holding only a thin Senate majority, but a true working-class party would be shouting these issues from the rooftops day-in and day-out, pulling them to the top of the national agenda, openly acknowledging the primacy of the class struggle and taking the side of the people in that struggle, giving the working masses something solid to vote for. The Democratic party we have now has done some good, but overall it still basically justifies the impression that politics is a good-old-boys' club of millionaire insiders who won't do anything to strike at the root of the systemic dysfunction that created and sustains the parasitic oligarchy and its power.

30 December, 2023 11:33  

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