Some argue that reporting the ratio of CEO pay to that of the median-compensated worker in the organization is useful since it highlights the sometimes large discrepancy between the pay of an average worker and that of corporate executives. One argument against reporting the ratio of CEO pay to median worker pay is that this is much more difficult to calculate in practice than in theory. The hourly earnings of workers at the bottom have been incredibly flat for the last generation. Only the top 5% have seen large gains over time. For CEOs, the gains are substantial. the multiple of CEO pay to median of top 5% of earners has doubled. Using the US as a case study, we should be thinking deeply about why: 1. hourly earnings of workers at the bottom have been incredibly flat for the last generation, 2. only the top 5% of workers have seen large earning gains over time, and 3. even against just these highly talented folks, the CEO pay ratio has doubled. However, more importantly, we should be thinking about what or whether these numbers forecast about future regulatory pressures and economic sustainability in the US and other free-market economies of interest.
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Hallock, Kevin F. 2011. "Pay Ratios and Pay Inequality." Workspan 54 (5) (05): 14-16.