EPI had a tremendously productive week, releasing research on CEO pay and income inequality, the rough labor market 2012 graduates must navigate, the impact of state and local government job cuts on women and African Americans, and the challenges facing low-wage workers.
CEOs made 231 times more than workers did in 2011
In CEO pay and the top 1%: How executive compensation and financial-sector pay have fueled income inequality, EPI President Lawrence Mishel and research assistant Natalie Sabadish find that CEO compensation has grown exponentially in recent decades, while worker compensation has been relatively stagnant. The report found:
- From 1978 to 2011, CEO compensation increased more than 725 percent, compared with an increase in compensation for workers of only 5.7 percent.
- CEOs were paid, on average, 231 times more than workers in 2011. This CEO-to-worker compensation ratio includes the value of stock options exercised by executives. An alternative measure of CEO compensation that includes the value of stock options granted in a given year yields a CEO-to-worker compensation ratio of 209.4-to-1. By comparison, the CEO-to-worker compensation ratio was roughly 20-to-1 in 1965.
While previewing data that will be further examined in the forthcoming 12th edition of The State of Working America, scheduled to be released this August, CEO pay and the top 1% is already drawing media attention to widening wage-growth disparities. Its findings were reported in outlets such as MSNBC.com, Los Angeles Times, Huffington Post, Daily Kos, and MSNBC’s Ed Show.
Class of 2012 faces high unemployment and depressed wages
Young workers are still struggling to overcome the deep crater the Great Recession left in the labor market, a new EPI briefing paper shows. In Class of 2012: Labor market for young graduates remains grim, Heidi Shierholz, Natalie Sabadish, and Hilary Wething find that 2012 graduates face high unemployment and underemployment rates, depressed wages, and burdensome student-loan debts. The report’s findings include:
- Over the last year, the unemployment rate for young high school graduates (age 17–20) averaged 31.1 percent, and the underemployment rate averaged 54.0 percent.
- For young college graduates (age 21–24), the unemployment rate averaged 9.4 percent over the last year, while the underemployment rate averaged 19.1 percent.
- Young workers who find jobs in today’s labor market accept lower wages than they would have a decade ago. Between 2000 and 2011, the real wages of young high school graduates declined by 11.1 percent, and the real wages of young college graduates declined by 5.4 percent.
Women and African Americans hit hardest by job losses in state and local governments
While the private sector has experienced some job growth since the Great Recession officially ended in 2009, the public sector has continued to shed jobs. In fact, in 2011, state and local governments experienced their worst job decline on record. The public-sector jobs crisis, by EPI experts David Cooper, Mary Gable, and Algernon Austin, finds that public-sector job losses have been particularly damaging for women and African Americans.
The report explains the particular importance of public-sector jobs for women and African Americans, the progress that state and local government employment has made in reducing wage disparities, and how cuts to state and local budgets have disproportionately hurt women and African Americans.
Some key findings include:
- Historically, the state and local public sectors have provided more equitable opportunities for women and people of color. As a result, women and African Americans constitute a disproportionately large share of the state and local public-sector workforce.
- Between 2007 (before the recession) and 2011, state and local governments shed about 765,000 jobs. Women and African Americans comprised about 70 percent and 20 percent, respectively, of those losses.
The future of work: Trends and challenges for low-wage workers
In The future of work: Trends and challenges for low-wage workers, EPI policy analyst Rebecca Thiess provides an overview of the jobs held by low-wage workers—disproportionately female, young, and minority—and analyzes how projected changes in job structure will affect them. In the next 10 years, it is unlikely that the composition of the jobs in the United States will shift to occupations with markedly higher pay, or to occupations that require significantly higher education or training levels than do those that exist today. In other words, there is no reason to expect that an upgrading of jobs will improve workers’ prospects. Full employment and higher compensation in the types of jobs that already exist are the necessary routes to economic prosperity, particularly for low-wage workers.
The report also finds:
- Low-wage workers are disproportionately female, young, and minority workers. And in 2010, 28.3 percent of workers were low-wage workers.
- Mississippi and Tennessee had the highest shares of low-wage workers in 2010, while the District of Columbia and Alaska had the lowest.
Reporters have already turned to Thiess’s paper to broaden the discussion of low worker wages and rising poverty.
- Calling the report “a wonderful new paper,” The Atlantic’s Derek Thompson focused on which occupations and which states have the highest shares of low-wage workers. Thompson wrote, “One in four U.S. workers — or nearly 40 million people — earn a salary below the federal poverty line of $23,000 for a family of four.* Who are they, where are they, and how does their education differ from the rest of the country? A wonderful new paper from the Economic Policy Institute explains it all.”
Influencing the debate
EPI President Lawrence Mishel’s work on the growing gap between productivity and workers’ wages continues to influence the public debate, with reporting from the New York Times, BusinessWeek, Slate.com, and Talking Points Memo drawing upon his research.
- In his blog post “Where the productivity went,” New York Times columnist Paul Krugman wrote, “Larry Mishel has a systematic breakdown of the reasons for worker income stagnation since 1973. He starts with the familiar divergence: productivity up 80 percent, the compensation (including benefits) of the median worker up only 11 percent. Where did the productivity go?”
- BusinessWeek’s Peter Coy added, “Mishel has done the most careful study to date of what accounts for the productivity/pay gap.”
- Slate.com’s Matt Yglesias wrote, a “great report that Larry Mishel wrote for the Economic Policy Institute last week” answers the question of where the productivity gains went during the last three decades. “Rather than a single cause, there are three separate sources of divergence. One is structural shift in which labor claims a smaller share of national economic output and capital claims a larger share. A second is a shift within the labor share toward greater inequality such that the mean wage rises faster than the median wage. And a third is a very interesting phenomenon that has to do with the existence of different inflation indexes.”
Paul Krugman makes EPI the first stop on his D.C. book tour
Click here to watch Krugman assess the current economic situation, explain what could and should be done, and field audience questions.