MORE ON CEO PAY VS. WORKER PAY. Ezra's post on the remarkable growth of CEO pay since the early 1990s made one commenter point out that the graph Ezra linked to used total compensation for CEOs but only actual wages for the workers. Comparing apples to oranges? Not really. This graph relates the growth in the CEO compensation packages to the minimum wage worker's overall compensation package. As you can see, the picture tells the same message as Ezra's original graph, although of course for only minimum wage workers. But there is no reason to assume that the shape of the graph would be any different in the case of average wage workers. Why have the CEO compensation packages risen so much in value? Theories abound, especially of more mechanical nature: Is it the growth in the size of the firms which makes their CEOs superstars, to be fought over among a handful of large firms? Or is it the greater use of stock options in the compensation packages, and if so, do these stock options actually tie the CEOs' remuneration more closely to their performance (or productivity)? Whatever the actual mechanics, the fact remains that the CEO pay packages have risen in value during each recent economic expansion and have not come down enough during periods of contraction to negate those boom gains, while any increase in the real value of workers' compensation packages has been much more modest. This is why today's CEOs earn an average over 300 times the average salary of today's workers. As recently as 1970s the average CEO compensation was only 40 times the average worker salary.
-- J. Goodrich