Corporate CEOs in America earn, on average, 30 times that of their typical employee. That doesn’t seem so bad, does it? Oh, wait. That was 30 years ago. Today, executives in large companies pull in 354 times more than their lowly workers. As these corporate leaders continue to handsomely reward themselves, over the past 30 years the average male American worker has seen no pay increase at all, although they continue to beat out females in the pay game. In the past 14 years, median salaries have actually dropped 10 percent when adjusted for inflation.
Richard Reich, Bill Clinton’s former Secretary of Labor, believes this widening gap between the salaries of princes and serfs is not only grossly unjust, but disastrous for the economy. Mininum wage employees can’t afford to buy stuff, which slows recovery. The fat cats advise their workers to make ends meet by applying for Medicaid and food stamps, which means, in effect, taxpayers are subsidizing the McDonald CEO’s $9,000/hour salary as he whines that minimum wage is too high.
Reich, whose documentary film Inequality for All, came out last year, will testify this week in favor a bill in California legislature, SB1372, which proposes to reset corporate taxes according to the CEO/typical worker ratio. The new law would also disallow loopholes such as subcontracting those low-paying jobs to another company in order to keep their numbers looking respectable. If they do that, companies will have to pay a higher tax.
Conservatives are crying that this bill is too complicated and a job killer, but the opposite is true. Reich maintains that CEOs don’t create jobs. By paying more money to the little guys, you increase their buying power, which improves the economy, expands businesses and creates more jobs.
The law isn’t perfect, but it’s a good start. If it is successful, maybe other states will take notice and do the same.
[box type=”shadow”] For the last 30 years, almost all the incentives operating on companies have been to lower the pay of their workers while increasing the pay of their CEOs and other top executives. It’s about time some incentives were applied in the other direction. [/box]
Watch Reich in the video below: