CEO pay soars as flat middle class wages erode with inflation

middle class wages

Gas prices are cutting into stagnant middle class wages as CEOs cash in on the productivity of U.S. workers. Image: Flickr/ debaird CC-BY-SA

CEO pay in corporate America rose 12 percent last year to a median of $9.6 million. Corporate profits were up nearly 30 percent in the fourth quarter, the fastest growth in more than 60 years. While CEOs were giving themselves pay raises, wages for U.S. workers were stagnant as rising gas and food prices eat into paychecks.

CEO pay rises at the expense of U.S. workers

At a time when millions of Americans simply hope they keep their jobs, average CEO pay has risen to surpass pre-recession levels. Companies that slashed employment and wages during the recession aren’t increasing them as sales rebound, but executive pay is a different story. As corporate profits soar, stock prices rise and productivity increases, CEOs can increase their own pay but don’t have to hire or award employees with raises because more than 13 million people are looking for work. There is no incentive to retain workers or entice new employees. CEOs from nearly every economic sector bailed out by taxpayers averaged 12 percent raises in 2010. Meanwhile, average pay for private sector workers grew about 2 percent. Unemployment hovered at 8.8 percent in March. Most economists predict the jobless rate will continue to remain high for years.

CEOs rake in huge stock options

The highest paid CEO in the U.S. last year was Phillipe Dauman of Viacom who pocketed $84.5 million in just nine months. The rising price of oil and gas has been good to Ray Irani of Occidental Petroleum, who was the runner up with $76.1 million, a 142 percent pay increase over 2009. Larry Ellison or Oracle, the third-richest American with a net worth of $39.5 billion according to Forbes, took home $70.1 million. Fueled by Wall Street, CEOs are raking in the biggest paydays since 2007 with stock options. Many CEOs accepted stock options during the recession when they held little value, knowing that huge paydays lied ahead when the market recovered. Thanks to taxpayer bailouts and interest-free leverage offered by the Federal Reserve, the stock market has recovered spectacularly and the CEOs are cashing in.  According to USA Today, many CEOs cashed in on stock options for windfalls of at least $20 million.

Middle class wages hit by rising commodity prices

The huge CEO pay increases are hard to swallow for the American middle class, which has watched wages stagnate for a generation. In the last five months, wages for U.S. hourly workers haven’t increased one penny, according to the Bureau of Labor Statistics. While U.S. workers who still have jobs aren’t getting raises, employers in developing nations are hiring new consumers who are pushing up demand and prices for food, oil, cotton and other commodities. Since the start of the year, U.S. wages and prices have been moving in opposite directions. Gas prices alone eat up more than half the average worker’s wage increase. The average U.S. commuter buys 12 gallons of gas a week. Filling the tank costs about $40 a month more than in 2010. Meanwhile, the average weekly wage is up just $18 from last year.


New York Times

USA Today


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