September 3, 2007
Labor Day. A day to value labor. But whose labor, in the United States today, do we truly value? Certainly not the labor of average working Americans.
No society that valued the labor of working people would ever let corporate chief executives make more in a day than workers can make in an entire year — or let the 20 highest-paid managers of private equity and hedge funds make more in 10 minutes, as they did last year, than workers take home over 12 months.
We have more alarming stats like these, in this week’s Too Much, from a juicy new report released just last week. Enjoy the holiday.
College football gets underway this week all across the United States, and the Kansas City Star took a moment last week to set the compensation stage for the upcoming season. In every state but Alaska, the paper’s research found, the top college football coach makes more than the state’s governor. In Alaska, colleges don’t play big-time football. Alabama sports the biggest coach-governor pay gap. University of Alabama coach Nick Saban makes over 35 times the $113,00 annual salary of Alabama Governor Bob Riley. By way of comparison, the average college professor in the United States now makes four times as much as the average American worker, notes economist Greg Mankiw, the same professor-worker differential in place back in 1905 . . .
Another new season also begins this month — the network TV season. This year’s programming line-up, says Gannett News analyst Mike Hughes, will feature “regular people with super powers” and “rich people with super problems.” TV producers, says Hughes, have been rushing “to create super-rich people and make them miserable.” ABC, for instance, “has bitter, rich men in Big Shots, troubled, rich women in Cashmere Mafia, and a shattered, rich family in Dirty, Sexy Money.” ABC executive Stephen McPherson denies any particular motive behind this fall’s plutocrat-heavy programming. Says the ABC entertainment president: “It’s not that we sat down and said, ‘Oh, we just want to tell stories of rich people.’”
A new round of national surveys — conducted by banks that specialize in serving wealthy clients — has found a major attitudinal about-face in how the ultra affluent see their wealth and future. Twenty and even ten years ago, notes Northern Trust senior VP William Whitt, people worth over $10 million were typically concentrating on preserving their wealth “by the time they hit their 50s.” Today, notes Whitt, “we see people still very much focused on building wealth.” What’s driving this hunger for more? A new survey by the Connecticut-based Phoenix wealth management network finds that 47 percent of today’s rich feel they “need 100 percent or more of their current income to guarantee a comfortable retirement.”
Is the United States becoming a nation where everyone will either be super-rich or work in the personal service of those who are? The latest sign of our bifurcated times: A Los Angeles-based company, Golden Eagle Publishing, has launched a glossy magazine “catering to the devoted domestics of millionaires-turned-billionaires.” The new Celeb Staff bimonthly is aiming for a readership that includes “real estate managers, nannies, butlers, chauffeurs, investment bankers, valets, chefs, and even personal pilots.” Beth Torre, Golden Eagle’s director of operations, feels certain her company has a winner in Celeb Staff. With super-rich households juggling three homes and private jets, she explains, “it’s taking more and more people to run the lives of high net-worth individuals.”
How much does the distribution of a nation’s income matter — to those without much income? Britain’s Office for National Statistics is now estimating that bonuses and “performance pay” for top British business executives will total about $52 billion this year. That same sum, says the New Statesman, would be enough to raise the annual take-home of the UK’s poorest 20 percent of workers by about $10,000 each. Movers and shakers in “the City,” the British equivalent to Wall Street, will this year collect — just by themselves — $28 billion in bonuses. That’s enough, notes Terence Blacker in the Independent, to slice child poverty in the UK by half.
Inequality
by the numbers
Newly revised!
Quote of the Week
“The outrageously massive rewards now attainable at the top of our economic ladder do our society no good.”
Executive Excess 2007, the latest CEO pay report from the Institute for Policy Studies and United for a Fair Economy, August 29, 2007
New Wisdom
on Wealth
Anne Elizabeth Noyes, Buyout Tax Debate Hits the Hamptons,August 30, 2007. Welcoming passersby with “have a wonderful wealthy day,” “Rob Dapore” and fellow activists — “tongues firmly planted in cheeks” — demand “more tax relief for private equity fund managers.”
What’s more difficult, running a federal cabinet-level department with a $50 billion annual budget or a corporation with $50 billion in annual revenue? Commanding 50,000 soldiers or managing 50,000 employees? Trying to find 50,000 customers for your products or 50,000 contributors to your cause?
That’s hard to say. The top execs at America’s major corporations, national nonprofits, federal departments, and military services all share daunting — and demanding — responsibilities.
But these national leaders don’t all get the same rewards.
Indeed, says a just-released annual report on CEO pay from the Institute for Policy Studies and United for a Fair Economy, the “pay gap between American business leaders and their leadership counterparts in other walks of American life today runs wider, often far wider, than the pay gap a generation ago between business leaders and average American workers.”
How much wider? In 1980, big-time CEOs “took home just over 40 times the pay of average American workers,” notes the new Executive Excess 2007 report. “Today’s average American CEO from a Fortune 500 company makes 364 times an average worker’s pay and over 70 times the pay of a four-star Army general.”
The lowest-paid of last year's 20 highest-paid CEOs in America, adds the report, “personally pocketed over seven times more compensation for his leadership labors than the 20 top leaders in Congress together.”
The new Executive Excess comes subtitled “The Staggering Social Cost of U.S. Business Leadership,” and the 32 pages of the report, all available online, repeatedly point out the price all Americans pay when corporate execs make so much more than everyone else.
Leadership pay gaps are siphoning off talent from public service, the report notes, and “creating a nonstop revolving door” between government and business that “breeds conflict of interest and corruption and distorts our democracy.”
These gaps, Executive Excess continues, are also discouraging individuals with leadership talent from entering less lucrative fields, where their skills could make an important contribution to our common well-being.
What could end over-the-top executive pay? Executive Excess proposes doubling the top federal tax rate on annual income over $10 million to 70 percent. Last year, the nation’s 20 top CEOs averaged $36.4 million, the 20 top private equity and hedge fund managers an incredible $657.5 million.
The new Executive Excess also proposes several more narrowly targeted initiatives, including a move to deny federal government contracts and subsidies to businesses that pay their top execs over 25 or 50 times what their lowest-paid workers take home.
“The federal government currently denies contracts to companies that increase, through discriminatory employment practices, racial or gender inequality,” the report observes. “The same principle could be invoked to deny contracts to companies that, through excessive executive compensation, increase the nation’s economic inequality.”
The Census Bureau last week released the nation’s latest annual income numbers. Over at the Heritage Foundation, the nation’s top conservative think tank, the new Census figures had economists turning cartwheels.
“The Census report brings good news: Poverty declined and income increased in 2006,” the Heritage Foundation happily proclaimed. “Families are becoming richer in today's economy.”
The Heritage Foundation has that half right. Families aren’t getting richer in today’s economy. Rich families are getting richer.
Yes, poverty nationally did decline from 2005 to 2006, the new Census figures show, but by less than one-third of 1 percent. And the nation registered that meager decrease only because poverty among the elderly — all praise to Social Security — dropped at over twice the national rate.
Among children and adults under 64, Census researchers actually found no statistically significant fall in either poverty rates or the number of children or working-age adults living in poverty, a state the Census Bureau defines as under $20,000 for a family of four.
And, yes, household incomes did “increase” in 2006, but by less than 1 percent, and this slight increase comes after five consecutive years of decline. In 2006, typical Americans families were still earning about $1,000 less, after inflation, than they earned in 2000.
Actual individual incomes, the new Census report’s fine print adds, are actually still declining. Full-time workers lost ground in 2006. The typical male full-timer made $42,261 last year, $482 less than 2005, after adjusting for inflation. The typical woman made $388 less.
Annual earnings of typical American male full-timers now stand, after taking inflation into account, about 5 percent under their 1973 level.
In 2006, the Census numbers also show, the top 5 percent of U.S. income earners — those households that made at least $174,012 — took in 22.3 percent of the nation’s income, their highest share of national income since the Census Bureau started reporting this stat.
But this figure only hints at how top-heavy America’s has become — because the Census Bureau systematically undercounts the dollars going into wealthy people’s pockets. Census researchers do not include capital gains income — profits from the sale of stock and other property — in their annual income breakdowns.
Census researchers also “top-code” their data. They count earnings only up to $999,999 per year. If an individual makes $5 million a year, as the Center for Budget and Policy Priorities points out, those annual earnings get recorded in the Census data as just $999,999.
Stat of the Week
In Manhattan, new dats from the Census Bureau show, the most affluent fifth of households last year averaged 40 times more income than the poorest fifth, a $351,333 to $8,855 margin. Nationally, the top fifth of income earners took home 15 times more income than the bottom fifth. No European nation has a margin greater than 8.2 times.
Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954.
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