There is a common thread linking the two biggest labor protests in America right now: Workers want a living wage after years of stagnant or falling pay, while across the bargaining table sit executives whose compensation has been growing wildly year after year.
Exorbitant CEO pay is a frustration shared by Hollywood creatives and Detroit autoworkers alike.
ICYMI: It's been four days since workers at three separate auto plants walked off the job and set up picket lines. (It doesn't look like a breakthrough is coming anytime soon. For the latest on the UAW strikes, follow my colleagues here.)
Meanwhile, more than 170,000 Hollywood writers and actors have been striking for months, demanding, among other things, better pay.
Let's dig in...
It's not that anyone expects the bosses to be paid the same as everyone else, but the gulf between the C-suite and the rank-and-file has been widening at an alarming rate for decades, with regular workers wages often stagnating or falling when adjusted for inflation.
Since 1978, the CEO compensation among America's 300 biggest companies has gone up 1,460%, while the typical worker's pay grew by just 18% (both adjusted for inflation), according to the Economic Policy Institute, a progressive think tank.
In the same period, those CEOs' compensation grew 37% faster than stock market growth, according to EPI.
To understand why the UAW is reluctant to budge on their 40% pay increase demand, there's a bit of history:
- The US auto industry very nearly collapsed in 2008 before the federal government injected $80 billion in taxpayer money into bankrupt Chrysler and GM. (You're welcome!)
- At the time, President Barack Obama emphasized how the government assistance would ensure "a new beginning for a great American industry" that would create new jobs and unleash "new prosperity."
- To help save the companies, union workers agreed to temporarily freeze wages and give up certain pension and health care benefits.
- Their reward? Average hourly earnings for workers in car manufacturing have fallen about 19%, adjusted for inflation, EPI Senior Economist Adam S. Hersh wrote last week.
- Over the same period, CEO pay at the Big Three has jumped an average of 40%.
The bosses, of course, are defending their lofty compensation packages.
GM CEO Mary Barra, the highest-paid executive among the Big Three, made $29 million last year, representing a 34% increase over the last four years.
When my colleague Vanessa Yurkevich pressed Barra on the fairness of her pay, Barra deflected, noting that "92% of it is based on performance on the company."
That comment refers to the fact that most of her compensation is tied to GM's stock and bonus incentives set by the automaker's board. (Barra enjoys a base salary of $2 million.)
But performance metrics can be rather squishy.
For example, a CEO may get a multimillion-dollar bonus as a reward for the company hitting a profit target (as Barra did in 2021).
But a company's profit depends not only on bringing in hearty revenue, but also on keeping costs — including workers' pay — low. (Boards have also been known to give CEOs "retention" bonuses when things go bad, lest they have to find a new person to right a sinking ship.)
The Hollywood bosses are doing even better, with the average pay for top executives hitting $28 million in 2021, up 53% from 2018, according to a Los Angeles Times analysis. The Writers Guild of America says the median pay for screenwriters has dropped 14% when adjusted for inflation over the past five years.
BOTTOM LINE
In 1965, CEOs at America's top companies could expect to earn roughly 20 times their average worker's pay. Today, it's 400 times more. It's taken a pandemic and its resulting lopsided labor market to create a backdrop where workers feel empowered to stand up and demand a fairer share of Corporate America's runaway success.
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