In recent years, many Americans have felt the weight of financial struggles as their earnings have not kept pace with inflation. It’s a concerning reality evidenced by the fact that, according to MarketWatch, your paycheck has been shrinking for five years. While we wish this were merely a fabrication, the truth is stark.
MarketWatch reports that even though hourly wages have seen a nominal increase of about 10 percent since the end of the Great Recession in mid-2009, when adjusted for inflation, real earnings have actually declined by 0.3 percent. This disheartening trend reveals that many American families are struggling to maintain their economic footing.
This unfortunate situation sheds light on the frustrations of the typical American worker. Many are putting in more effort than ever before, yet their financial rewards seem to diminish as a result.
The feeling can be likened to running in thick sand along a seemingly endless beach—exerting effort without seeing adequate returns. Surprisingly, in the face of this, the President asserts that the economy is “booming.”
Executive Windfalls
Adding salt to the wound, American workers increasingly face job insecurity in the current economic landscape. Long-term dedication to a company holds little promise of employment stability, particularly when profits are at stake.
This has led to a reliance on temp agencies and contract positions for many diligent office workers. In fact, contract workers are projected to replace full-time positions within the next decade.
Meanwhile, executives at the helm are capitalizing on the hard work of their employees, redirecting profits into their own pockets. You may have heard of the surge in corporate stock buybacks; these actions primarily benefit top-tier executives.
So, how does this occur?
Corporations take advantage of low-interest rates, facilitated by the Federal Reserve, to borrow substantial sums. They then invest this money back into their company stocks, inflating stock prices. Since a significant portion of executive compensation is tied to stock performance, the effects are quite lucrative for them.
For instance, recent findings from the Roosevelt Institute reveal the magnitude of these disparities.
Fire and Brimstone
Over the last thirty years, executive compensation in the U.S. has skyrocketed. In 2012, the average total compensation for the top 500 executives in the S&P ExecuComp database reached $30.3 million, with 42 percent stemming from stock options and 41 percent from stock awards. This figure represents nearly three times the inflation-adjusted compensation from the early 1990s—an era when excessive pay was already a topic of concern.
Crucially, these vast wealth accumulations weren’t self-generated; they result from decisions made by boards of directors, typically composed of other CEOs keen on inflating executive pay. These boards have also sanctioned billion-dollar stock buyback programs that allow executives to profit from manipulated stock prices.
Let’s analyze this discrepancy. While the 500 top executives averaged $30.3 million, the median U.S. income stands at $53,891.
This translates to executives earning an astounding 56,224 percent more than the median worker. Are they indeed working 56,224 percent harder or contributing vastly more value than the average employee?
Of course not. These individuals are just regular people who have skillfully navigated an imbalanced system to their advantage. It’s an unfortunate reality—one that could lead to significant repercussions down the line.
Sincerely,
MN Gordon
for Economic Prism
