Tuesday, April 25, 2006

A Day's Pay for a Day's Work?

For years I've heard people say, "The best program for social uplift is a job."

For years we've been trying to assist people in finding jobs.

But, all along the truth has been quite different.

If you are an unskilled worker, getting a job today doesn't solve all of your basic problems.

The fact is hard work doesn't pay what it used to pay. Better, hard work pays about the same or less than it did twenty years ago.

I'm going to resist the temptation here to launch out on a tirade about raising the minimum wage. I just don't think I'm up to reading posts about how that doesn't help anything since it only drives the costs of goods and services up while eliminating jobs for the very unskilled and/or for teen workers.

So, today I'll just point the other direction.

News of executive pay scales appears in every daily I read. Saturday's (April 22, 2006) New York Times carried a report by Steven Greenhouse noting that "chief executives' pay increased by 27% last year, to an average of $11.3 million, while that of most workers languished."

Greenhouse appeared to be quoting from the special report that appeared in the same paper on Sunday, April 9, 2006 (Off to the Races Again, Leaving Many Behind, Section 3). The entire section of the paper reported on executive pay and its amazing growth at the same time ordinary workers suffered with static wages and declining benefits.

The ratio of CEO pay to average worker's salary has changed dramatically since 1960 when executives averaged 41 times more than average workers. In 2004, the pay for CEOs skyrocketed to 431 times that of the average worker!

I'm sure those folks have plenty of worries every day. But, '"making ends meet" is not likely to be found on their personal "To Do" lists.

The annual percent change in real wages for working class persons from 2001 to 2004 reflects a downward trend while the average annual percent change in after-tax corporate profits is up well over 10%.

Declining value in workers' wages is coupled today with the loss or absence of health insurance, the evaporation of defined benefit plans or even 401 K plans for many workers and rising costs for higher education.

Stories about the "golden parachutes" of retiring executives, the rising cost of crude oil and gasoline, record profits among the big oil companies, etc., etc., etc., never contain any analysis about the impact of the rising costs of goods and services on those at the very bottom.

Here's an interesting and sobering fact: nearly half of American children depend on a worker with a high school education or less.

People who work hard should be able to earn enough to provide for their families on their own, regardless of their educational attainment, social status or skill levels.

Some people will tell me that I should just stick to the business of handing out food.

While we will distribute over 1 million pounds of groceries during 2006, that cannot become our major enterprise.

As we work to build a genuine, powerful community of people, our goal is to attack poverty and its causes. That will include providing all sorts of other services and opportunities.

It will also lead us to support organized efforts to see workers' pay increase.


Agent B said...

"Some people will tell me that I should just stick to the business of handing out food."

Well...THIS person will applaud you and encourage you to keep using your influence to expose the inner workings of the empire.

Good agent work...keep it up.

KentF said...

What are the first steps in helping people attain necessary skills to move up in the world? How can we motivate successful people to spend an hour a month mentoring the less fortunate. How do we get the perfectly healthy early-retired 62 year old off the golf course one day a week (hey, he can still play 5 times/week - not bad) and into a equipping role? These are the questions I'm asking myself and others today.

Matthew said...

I'm not sure I understand what CEO pay has to do with a living wage.

Even if average CEO pay is 431 times average employee pay, I expect that, on average, those CEOs employ more than 431 (or even 862) workers. So the solution is not as simple as redistributing the CEO's salary.

Maybe I could make the connection if I knew *why* there's such a huge difference in average CEO pay and average employee pay.

Suzie said...

I heard today on the radio that the salary of members of Congress has risen 250% since the mid-80s. This person was comparing this number to the rise of gas prices which is 60%.
I'm not sure how valid the numbers are, but if they are, what does that say?

Larry James said...

Matthew, beyond the hard numbers this is about the way we regard work in this nation and how we look at wealth and wealth creation. It also is about excess and equity.

I agree, spreading CEO pay about would not solve the problem. My only question and point actually is shouldn't we and couldn't we live on less margin to see everyone do some better? People who work hard should be able to provide for their families without depending on charity.

Chris Field said...

Your point about people working hard and still not being able to live is a great one. In fact, I have mentioned this fact to many people who have never thought it through before. Most are shocked to learn what 40 hours a week at minimum wage really earn a person. And I think that ties in perfectly with the point about CEO's ridiculous pay. The point is not that CEO's should do this or that but that America is obsessed with continuing to reward the powerful and the educated while we willingly watch those on the fringes flounder and even die. Why is this? I believe it is due in large part to the "American Dream" and "Pull Yourself Up From Your Bootstraps" mentality that America was founded on. We have become so obsesses with this idea, that we feel like it is appropriate to have whatever we fairly earn as ours. It is our hard work after all, isn't it?

Unfortunately, God isn't a big fan of the American Dream mentality when it's only a dream for much of the country.

Darius said...

"Sustainability" is a word we often hear applied to environmental issues. I think it also applies here. The growing gap between rich and poor isn't sustainable. One way or another, it can't just keep on going in the direction it's going...

Jeremy Gregg said...

I would advocate for a policy in which the CEO pay is a base multiple of their average workers' pay, which would provide the CEO with incentive to raise the average workers' pay. This could be done by tying the workers' pay to the success of the company (i.e. they are provided with guaranteed livable wages each month, but recevie quarterly bonuses based on individual/business unit performance and an annual bonus based on company performance).

Similarly, I think that our public officials in the House and the Senate should have a salary that is equal to the median household income in the US: accoridng to the U.S. Census Bureau, this was $65,093 for a family of four. That would provide them with an incentive to raise the median income across the country.

Anonymous said...

I don't understand why it is an "either - or" proposition. Why should a CEO's pay be cut if he is doing an excellent job for the company - such a move will not have any impact on the low wage workers' salary because the company will not take the CEO's pay cut and spread it around to the low wage worker. Why not just pay the low wage workers more and leave the CEO alone? In my opinion ( for whatever it is worth) the " Let's cut the CEO's pay" comes across as politics of envy and does not advance the ball, so we need to focus on the real issue that we all want resolved - better wages for all hard workers. David D.

Larry James said...

I like your idea, Jeremy. And, David, you are correct, the point really isn't CEO pay exactly. (Although, I'm not sure what any one person needs with $400 million in earnings annually. . .how is it we value that sort of work more than we value the production or service end of the equation? Stuff for another post!).

The point is how we under-value honest work in this country today. If a corporation decided to pass along a protion of its earnings in a profit-share arrangement or something akin to this out of its deep respect for hard work, we would be talking about something else here.

People should be rewarded for their skills and productivity. At the same time, persons who lack skills should be provided a chance to develop new skills that are more marketable or there should be a way to reward more adequately lower skilled laborers for their efforts and contributions.

Jeremy Gregg said...

David D.:

The problem is that executive pay is not necessarily tied to "doing an excellent job for the company." Frequently, CEOs receive enormous salaries despite underperformance.

We have a problem in which our economy over-values the work of CEOs. Yes, it is important to invest in the right people. And yes, the work of CEOs is very difficult -- they work long hours and invest a lot of their personal life into the business. But is that commitment really worth more than the commitment of over 400 people who sweat and labor in their factories, who man the registers and who interact with customers?

The concern Larry voices is not over the fact that CEOs do not deserve high salaries. It is over the disproportionate INCREASE in those salaries when compared to the increase of lower-level employees. That discrepency, in light of rising costs of living (health care, gasoline, housing, etc.), is the real problem.

Anonymous said...


Don't get me wrong, I am on your side of this debate. However,I think the overpaid CEO argument is not very effective. I do believe that a CEO's commitment is different than the front line guy for a lot of reasons, but I don't think that the diffence in those commitments should result in unfair wages for workers. For me, the issue is focused on how we can get the fair wages in place for workers - so they can earn enough to live in the way they dream about living and not have to work 2 or 3 jobs and barely scrape by - and it is not at all about trying to cut and redistribute the CEO's pay. Jeremy, we both want the same thing, but I guess we go about it differently ... and that is ok by me. I hope we one day get what we both want. Thanks for your thoughts and allowing me to share mine. David D.

Jeremy Gregg said...

David, I appreciate your replies. Yes, I think we both want the same thing... and at heart, I think the CEOs do, as well.

There are many things that need to be changed, but one of them is this: shareholder values. The owners of these companies need to take a hard look at the return on their investment in these CEOs compared to their under-investment in the workforce. I think that they will be surprised to learn how ineffective this massive salary increase has been in terms of overall productivity.

I think that our country needs to take a hard look at how we earn our money, and how we spend it. We need to understand that we have two forms of voting in this country: one is our ballot, and the second is our dollar.

When we invest in companies that do not provide livable wages to their employees, we are fueling the injustice of this system. When we shop at companies that do not support human rights, we similarly support this system.

Several years ago, the Chronicle of Philanthropy ran an interesting article on how foundations could use their investments -- let's not forget how that these are really nothing more than financial investment institutions -- to drive social change. In other words, a foundation that makes grants to support children should not invest their funds in companies that promote child labor.

We have a lot of changes to make in this world. Primarily, I think that we should make a change in perspective.

Let us hope that this conversation that you and I are having, here in the public forum, will somehow promote this change.