Today is Labor Day, when Americans take time off for barbecues or picnics or time on the river as they mark the unofficial end of summer. And while the day is a time for leisure, it also is an appropriate occasion to examine the condition of the American worker.
In many ways, these are good times for workers in the U.S. Unemployment is near historic lows, the stock market has been tumultuous but overall is performing well, and corporate profits are strong. Part of that success has been fueled by deficit spending from the federal government, which has driven the national debt past the $22 trillion mark. Despite a robust economy, the debt is growing at a record pace — a dichotomy that reflects mismanagement by the Trump administration and Congress.
Most Americans are not concerned with the details; they are happy as long as they have a job, and so many people are working that the economy is at what traditionally is considered “full employment.” But in many aspects, average workers are not reaping the benefits of that economy.
This year marked the first under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that U.S. corporations were required to release data comparing CEO compensation with that of the typical worker. That data revealed that the average CEO of an S&P 500 company earned $14.5 million in 2018 — 287 times more than their median employee. According to the left-leaning Economic Policy Institute, in 1965 the average CEO earned 20 times the salary of their typical employee.
Several changes over the years have contributed to CEO compensation outpacing that of workers. One is a quick decline in the influence of labor unions. Another is extensive tax cuts for high-earners, which have provided additional incentive for executives to negotiate high salaries and elaborate stock packages.
But one of the key drivers of CEO compensation is the easing of rules allowing corporations to conduct stock buybacks. With CEO pay often coming in the form of stock options, companies have incentive to buy their own stock to inflate the price and, therefore, increase the salaries of executives. According to the Roosevelt Institute, since the mid-2000s, companies have spent 94 percent of corporate profits on stock buybacks and dividends.
Proponents of such a system argue that leading a company requires special skills to drive innovation and oversee thousands of workers. And there is no formula for deciding what is a “fair” ratio between CEO salaries and workers’ wages.
The losers under this system are average workers and small businesses. The leader of a local business is not earning $14.5 million a year; he or she is simply trying to stay in business, pay their employees a living wage and keep revenue in their community. Small businesses remain the backbone of the American economy, but for decades the pendulum has gradually swung in favor of conglomerates. That makes it more difficult for local companies to avoid closing or being swallowed a larger predator.
All of this has left the typical American worker — the person we celebrate today — financially treading water. In the past 10 years, executives at S&P 500 companies saw their compensation increase by an average of $5 million, while rank-and-file workers increased about $8,000.
Those facts add a different perspective to Labor Day. While we honor workers today, it is clear that those workers need a Congress and a president who will recognize their contributions more than one day a year.
