Building an Economy that Works for Everyone

What if we set a maximum wage for CEOs?

John Burbank

John Burbank, Executive Director, Economic Opportunity Institute

It’s an ode to cognitive dissonance when pundits come out swinging (rhetorically) against a strong minimum wage or decent pensions for everyday working people but don’t even bat an eyelash at big-time CEOs who take home millions of dollars a year or outsource local jobs — especially when the economic evidence for the former, and against the latter, is so strong.

For example, Washington state has had the highest minimum wage in the nation for years, and yet the state’s unemployment rate is on par with the national rate. Seattle rolled out the first phase of an eventual $15 minimum wage, and King County unemployment is down to 3.3 percent.

Anyone dismissing that as anecdotal evidence ought to review a recent study from the Center for Economic Policy Research which found across-the-board positive effects in 12 of 13 states that increased their minimum wage in early 2014. Or, take a look at the work of Michael Reich, an economics professor at University of California at Berkeley with a doctorate from Harvard, and a team of other well-credentialed academics, who compiled minimum wage and employment data from around the country from the past 25 years — research that paired every set of counties in the U.S. across state lines with different minimum wages. Their conclusions: Minimum wage increases resulted in higher incomes for low-wage workers, lower rates of job turnover and had no impact on the number of jobs in low-wage industries.

Economy boosting jobs are ones that pay enough for people to maintain spending on the basics such as utilities, repairs, doctor visits and so on, boosting families, communities and local businesses in the process. So why do some CEOs seem to be intent on busting our economy instead?

Microsoft CEO Satya Nadella, according to just-released CEO compensation rankings, got $84 million in 2014 (over 2000 times the $40,000 pay of a typical Washington worker, according to 2014 Current Population Survey data). Mr. Nadella is presiding over the layoff of 18,000 workers, about 14 percent of the Microsoft workforce.

Boeing’s Jim McNerney received a cool $23.5 million, or about 587 times the typical worker’s earnings. He’s overseeing a year of job cuts in our state, overturning the Boeing Machinists’ defined benefit pension, and, as a cherry on top, successfully bullying the Legislature for another $4 billion tax giveaway.

Brian Roberts, Comcast’s CEO, received $26.5 million. Think about that when you are paying your monthly Comcast bill.

The damage goes deeper than that.

By hiding its profits in overseas tax havens, or setting up a store front in Reno to sell Microsoft products, Microsoft skips out on literally billions of dollars in taxes to our state and to the federal government. It is no wonder legislators are having a difficult time meeting the voters’ mandate to decrease class sizes in public schools, and have (until very recently) dramatically increased tuition at community colleges and public universities.

Boeing has paid federal taxes just three times in the past dozen years, according to the Seattle Times, for a cumulative net $1.3 billion federal tax refund. That works out to an average tax rate in that period of close to negative 3 percent.

If large corporations don’t pay their taxes, then funding for education, health and other public priorities is shifted to small businesses, kids, families and communities themselves. Funding for family leave insurance, which would enable parents to give their kids a stronger start in life, stays on the back burner; elementary-school students end up with larger classes and less personal attention; and college students go deep into debt to pay their tuition.

Outsized CEO pay packages take from most of us — whether through higher prices at checkout, pushing down workers’ wages and benefits, or not paying taxes toward the common good — and redistribute the money to a privileged few.

It doesn’t have to be this way.

We have a minimum wage — why not a maximum wage? History might even guide us to a reasonable standard here. The average CEO-to-worker pay ratio was 20-to-1 in the 1950s, 42-to-1 in 1980, and 120-to-1 in 2000, so capping pay at 200 times the median wage would mean CEOs could earn up to $8 million a year, or about $3,846 per hour in our state. Not bad — even compared to Seattle’s $15 minimum wage!

Original: The Everett Herald »

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