Big businesses can’t afford to hire (but they can afford to give their CEOs big raises)

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Tell your network:

While much of America’s pay is down, CEO pay is up. Way up.

The Statesman Journal shared a report from Associated Press on Friday that showed that “The head of a typical public company made $9.6 million in 2011…That was up more than 6 percent from the previous year, and is the second year in a row of increases.”

The AFL-CIO reported on this same data last month, updating their “Corporate Watch” interactive website to express the findings, including this new CEO pay data from 2011. (Wondering how much more a CEO made than you last year? I’m 99% sure the answer is: a lot. But go on and click through — it’s a neat tool.)

What’s important about this story is not that CEOs make more money than the average worker. It is completely reasonable to expect individuals who manage large companies and hundreds of employees to be compensated for their work at a greater pay rate than those who manage few or none. What is notable, though, is the rapid and extreme increase of this compensation — particularly during a time when businesses allege that it’s the economy that prevents them from hiring.

The Economic Policy Institute shows that, in 1965, the average CEO made about 25 times more than the average employee; by 1980, that rate had grown to about 35 times more. But that ratio began exploding in the 1990s, leading us to our current situation: where the average CEO makes 380 times more than the average worker.

(Click here for the full infographic at AFL-CIO’s Corporate Watch)

But while this trend has been happening for nearly two decades, the new data shows that these pay increases for CEOs are completely arbitrary and disconnected from the reality of their work. Over the past two years, businesses have posted losses and insist they’re not hiring because of the “bad economy.” Because of this, most families have seen (and still see) lost or reduced wages. Yet, during this same time period, those businesses continue to pay their CEOs more and more.

(Click here for the full infographic at AFL-CIO’s Corporate Watch)

As Matthew Yglesias of Slate calculates:

Among S&P 500 firms, CEO pay grew 22.8 percent on average in 2010 and then grew 13.9 percent in 2011. That’s a total nominal increase of 40 percent when you aggregate it. Obviously nothing else in wages, incomes, economic growth, stock market performance, or anything else has been nearly that robust.



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