The high cost of unequal pay in the US
In case you’re already feeling slightly dyspeptic after Christmas, here’s some news from the US that will leave a really sour taste in your mouth. Just before Christmas, the union- and Democrat-backed Americans for Financial Reform (AFFR) held a conference on unequal pay which focused on the extent to which top corporates are paid obscene amounts, and on the damage that has done to the US economy. Pay disparity has risen enormously in the US over the last thirty years (similar trends are developing in the UK too), and as well as depressing demand through lower wages for ordinary families and forcing them to take on debvts they cannot afford, the spiralling remuneration of the super-rich has led to them investing their surplus cash in ever riskier investments. Both trends stoked the sub-prime mortgage crisis that caused the Global Financial Crisis of 2008.
In 1980, AFLCIO President Rich Trumka told the conference, executives at the USA’s largest companies earned about 42 times the level paid the average factory worker, according to an estimate by BusinessWeek magazine at the time. Today, he said, the average CEO at a corporation in the Standard & Poor’s 500 collects a payout that is some 343 times larger than the median paycheck received by the average worker.
Some of the ratios between top pay and median pay rates (that’s averagepay, not the worst paid) are truly mind-boggling: like UnitedHealth CEO Stephen Hemsley who is paid 1,737 times the typical worker at the company ($102m in 2011, compared with the median worker at $58,700 – or in sterling, £65m compared to £37,500). Giant retailer Wal-Mart had the second highest pay disparity gap, with CEO Michael Duke making 717 times what the median worker in his company does.
The US Government’s Securities and Exchange Commission is reported to be drafting legislation to force disclosure of the ratio of executive pay to median pay, and the AFLCIO is backing the campaign for its adoption. The independent High Pay Commission in the UK looked at very similar issues in its November 2011 report.