A new study from the Economic Policy Institute (EPI) finds that pay packages for average CEOs have gone up exponentially, while workers’ wages have failed to keep up with costs of living.

The EPI report, which was published Wednesday, analyzed CEO pay packages between 1978 and 2018 and found that when accounting for stock options “realized” (which is different than when stock is actually cashed in), CEO compensation grew by 940% in that 40-year period. However, the “options realized” metric is a conservative estimate, and the EPI estimates that CEO pay actually went by somewhere closer to 1,007% in that same time frame.

But while CEOs were enjoying sky-high compensation, workers did not share in their employers’ wealth. the EPI found that average worker pay only increased by 12%. However, workers are making even less money today when accounting for the fact that costs of living have risen by much more than 12% over the last 40 years.

Data compiled by Statista found that while national monthly median asking rent in 1980 was around $308/month at the time (roughly $916 in 2017 dollars), it was roughly $1,492/month in 2017. Additionally, out-of-pocket health expenditures per capita have also increased exponentially in the same time frame the EPI studied. According to the Peterson-Kaiser Health System Tracker, per-capita out-of-pocket healthcare costs went from $659 in 2017 dollars to $1,124 in 2017.

Out-of-pocket healthcare expenditures per capita, 1978-2017 (Data and chart by Peterson-Kaiser Health System Tracker)

The EPI’s findings on the increase in average worker pay compared to costs of living are very similar to findings published by real estate site ApartmentList in 2016. According to ApartmentList, inflation-adjusted rents increased by 64% between 1960 and 2016, while real household income only increased by approximately 18%.

“The situation was particularly challenging from 2000 – 2010: household incomes actually fell by 7%, while rents rose by 12%,” ApartmentList wrote. “As a result, the share of cost-burdened renters [renters paying more than 30% of their monthly income in rent] nationwide more than doubled, from 24% in 1960 to 49% in 2014.”

Since 1978, the trend of CEO pay increasing while worker pay stagnated could coincide with one major defining event for organized labor — President Ronald Reagan’s decision to bust the air traffic controllers’ union during a strike in 1981. In 2011, a New York Times op-ed by Georgetown University professor Joseph A. McCartin referred to that event as “the strike that busted unions.

“His crushing of the controllers’ walkout — which he believed was justified because federal workers were not allowed under the law to strike — has helped undermine the private-sector rights he once defended… By 2010, the number of workers participating in walkouts was less than 2 percent of what it had been when Reagan led the actors’ strike in 1952. Lacking the leverage that strikes once provided, unions have been unable to pressure employers to increase wages as productivity rises. Inequality has ballooned to a level not seen since Reagan’s boyhood in the 1920s.”

Senators Bernie Sanders (I-Vermont) and Elizabeth Warren (D-Massachusetts) have both made steep economic inequality a cornerstone of their 2020 presidential campaigns. Sanders has proposed drastically raising the estate tax on inherited wealth, while Warren has called for an “ultra-millionaires tax” that would tax the net worths of America’s wealthiest residents, who own at least $50 million in total wealth.

(Featured image: Hakee Chang/Creative Commons, Airman 1st Class Monet Villacorte/Public Domain)


Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.

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