CEO Pay Soars: Executives Earn 200 Times More Than Average Workers in 2023

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The median pay of a CEO was $16.3 million in 2023, almost 200 times the typical worker wage, according to data analyzed by Equilar. The disparity is driven in part by generous stock awards that make up roughly 70 percent of total compensation packages. Putting this in perspective: The annual pay hike amounted to $4,300 for workers, while CEOs enjoyed an extra $1.5 million.

CEO pay has increased by over 1,200 percent since 1978, compared with only a 15 percent rise in wages for the typical worker over this time, according to the Economic Policy Institute (EPI).

Lawrence Mishel, a distinguished fellow at the EPI, provides the reasons for the large disparity:

• high unemployment
• globalization
• the erosion of unions
• low labor standards
• increase in noncompete clauses and domestic outsourcing

This widening gap is one reason why Americans are dissatisfied with the economy. “Most of the focus here is on inflation, which people are really feeling, but they’re feeling the pain of inflation more because they’re not seeing their wages go up enough,” according to Sarah Anderson, director at the Global Economy Project, at the progressive Institute for Policy Studies.

The top-paid CEOs of companies in the S&P 500 Index, according to an AP survey, are:

• Hock Tan of Broadcom Inc., with a compensation package valued close to $162 million
• William Lansing of Fair Isaac Corp. (FICO): $66.3 million
• Tim Cook of Apple Inc.: $63.2 million
• Hamid Moghadam of Prologis Inc.: $50.9 million
• Ted Sarandos, co-CEO of Netflix: $49.8 million

Financially Struggling Americans: Majority

Lower-income consumers are falling behind as higher interest rates, inflation, and the end of pandemic-era support are impacting at roughly the same time for the most part. Higher rates hit selectively. If you borrowed at pandemic-era near-zero rates you haven’t been hit with the highest rates in four decades. But borrowers who didn’t qualify for long-term fixed-rate loans are borrowing today at much higher interest rates. Credit-card rates jumped up as the Federal Reserve tightened, from a post-pandemic low of 16 percent to almost 23 percent for borrowers who don’t pay their credit card balance in full each month.

Anyone who wants to buy a house or a car faces today both higher prices and much higher rates. Many simply cannot make the math work for them—with applications for loans to buy a home this past year at their lowest since 1995.

Inflation hurt low-income households more than the wealthy because these necessities make up a much higher proportion of the spending their income must pay for. The cost of food, energy and rent rose more than most other items following the pandemic, making up a bigger share of consumption for the poor.

Together, higher prices and higher interest rates have been especially hard on younger low-end consumers. Those under 30 years old, and missing three monthly credit-card or auto-loan payments, reached the highest rate last year since the financial crisis of 2008–09, according to data from the Federal Reserve Bank of New York. A New York Fed study of auto loans showed the steepest rise in borrowers missing payments occurred across low-income regions.

Source: Federal Reserve Bank of New York

Financially Well-Off Americans: Minority

The generosity of monetary and fiscal policy that sent waves of trillions into the economy to blunt the impact of a pandemic-caused virtual economic shutdown found parking places in almost all asset categories. While some of this stimulus was used for consumption and paying bills, the excessive amount ended up mostly invested in assets, bidding up and inflating asset values across stocks, cryptocurrencies, homes, even vehicles. The wealthy own most of these assets, and, as such, benefitted greatly from the asset value increases.

Federal Reserve data indicate that the top 1 percent of households in the United States held 32.3 percent of the country’s wealth, while the bottom 50 percent held 2.6 percent. Specifically, this group owns a significant portion of assets such as stocks, real estate, and other investments. The top 10 percent (which includes the top 1 percent) collectively own 69.8 percent of the total U.S. net worth in. Since 1990, the share of wealth held by the top 1 percent has increased, while other wealth brackets remained relatively stable. Notably, the richest 0.1 percent and 1 percent saw the most significant gains in their wealth share during this period.

Source: Board of Governors of the Federal Reserve System [US]

Lawrence Katz, the Elisabeth Allison Professor of Economics in Harvard’s Faculty of Arts and Sciences (FAS), believes the gap between the top 1 percent of Americans and the rest of Americans results in disproportionate economic and political power and a growing educational divide that in turn feeds social segregation and class or caste society.

The increasing wealth gap poses dangers for both society and the economy:

• Reduced social mobility. A widening wealth gap dampens social mobility. When wealth is concentrated in the hands of a few, it becomes harder for individuals from lower-income backgrounds to move up the economic ladder.
• Less-educated workforce. As wealth inequality grows, access to quality education becomes uneven. A less-educated workforce struggles to compete in a global economy that demands specialized skills and knowledge.
• Political pressures and instability. Higher-income inequality can also lead to political tensions. Discontent among those left behind economically may result in pressure for policy changes, impacting trade, investment, and hiring decisions.
• Health and crime burdens. Poverty is associated with poor public health and increased crime rates. These burdens strain resources and negatively impact economic productivity.
• Global economic threat. The widening wealth gap isn’t just a national issue; it threatens global economic growth. If inequality continues to rise, it will undermine stability and prosperity throughout the world.

Addressing these challenges requires thoughtful policies and efforts to promote economic equity and opportunity for all.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.