Under Trump, CEO Pay Soars While Employee Wages Decrease—And Tax Cuts Could Make Gap Even Bigger

Compensation for America’s top executives grew 17 percent in 2017 as real wages for workers declined, according to a study released Thursday.

Despite President Donald Trump’s repeated promises to raise the salaries of average Americans, chief executives earned 312 times more than the average employee during his first year in office, according to a new analysis by the Economic Policy Institute (EPI).

The average CEO of the largest 350 companies in the U.S. received $18.9 million in compensation last year, up from $16 million in 2016. The main difference in pay came from stock awards and cashed-in stock options, not salary growth, the analysis found.

Under the Republicans’ tax plan, passed in 2017, companies spent 37 times more on stock buybacks than on bonuses or increased wages for workers. These buybacks bolstered share price and benefited top executives, who tend to receive stock as part of their compensation package.

“With wages for working people barely budging, it’s remarkable to see top CEO pay surging again,” said Lawrence Mishel, an EPI fellow and co-author of the study. “It is difficult to believe that Congress passed a tax cut weighted so heavily towards the wealthy when the nation’s top CEOs are clearly doing fine.”

The study also compared CEO pay growth with the wage growth of the top 0.1 percent of wage earners. It found that in the past 40 years, CEO pay has grown by 1,070 percent, while the top wage earners have seen growth of 308 percent.

Statista has provided an overview of the discrepancy.

20180817_CEO_to_Worker Overview of CEO-to-worker compensation ratio in the U.S. since 1965 based on Economic Policy Institute data. Statista

“Skyrocketing CEO pay is not a reflection of the market for executive talent,” said Jessica Schieder, an EPI fellow and study co-author. “We know this because CEO compensation has grown far faster than even the very highest earners in the country. This means that CEO pay can be brought down with little if any impact on the output of the economy or firm performance.”

Real average hourly earnings for the American worker declined by 0.2 percent between July 2017 and July 2018, according to the Bureau of Labor Statistics.

“Tax reform is working,” Republican House Speaker Paul Ryan told reporters in January. “Workers are coming home and telling their families they got a bonus, or they got a raise or they got better benefits.”

Since passage of the tax cuts, the S&P 500 has increased by nearly 7 percent. 

But the gap between chief executives and workers continues to grow. Last year, McDonald’s CEO Steve Easterbrook earned $21.7 million, while his  employees brought home a median wage of $7,017. Walmart CEO Doug McMillon earned over $22 million, while employees earned about $19,000.

A May analysis by the Associated Press and Equilar, an executive data company, found average CEO pay to be $11.7 million, up 8 percent from the year before. The analysis omitted any CEOs who had been in their position for less than two years and calculated median pay. 

This article was updated to include an infographic.

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