A proposal by Treasury Secretary Steven Mnuchin — a former Goldman Sachs executive — would enable higher CEO pay and even less pay for workers.
The Wall Street Journal (WSJ) recently reported that Mnuchin published recommendations in a Treasury report that called for the repeal of language in the 2010 Dodd-Frank financial reform legislation that forces corporations to reveal how much average workers are paid in comparison to the CEOs of those same companies. The rule is slated to go into effect next year, but Republicans in Congress argue that the rule is simply meant to make CEOs ashamed of their compensation packages.
Currently, CEOs make, on average, 271 times more than their average workers, according to a study from the Economic Policy Institute (EPI). Less than 30 years ago, CEOs made just 59 times more than workers. And in 1965, top executives only made 20 times more than the average employee. Of course, this varies by company — average hourly pay for a full-time Walmart worker in 2016 was roughly $13, or $27,040 per year. Walmart e-commerce CEO Mark Lore made $243.9 million last year, making his compensation 9,019 times greater than the average Walmart worker.
“Exorbitant CEO pay means that the fruits of economic growth are not going to ordinary workers, since the higher CEO pay does not reflect correspondingly higher output,” EPI scholars Lawrence Mishel and Jessica Schieder wrote in their report.
2015 data from EPI analyzing worker productivity and compensation suggests that workers are not sharing in the higher profits associated with greater productivity. The trend of workers’ salaries failing to keep up with productivity became exacerbated in the late 1970s and early 1980s, when legislation targeting labor unions resulted in unions losing influence in the workplace.
Beyond the call for repealing the CEO-to-worker pay gap disclosure rule, Secretary Mnuchin’s report also alarmingly calls for a stop to rules requiring companies disclose whether or not the raw materials for their products come from conflict regions, like the war-torn Democratic Republic of Congo (DRC). Tech companies like Apple, Google, and Microsoft depend on materials like columbite and tantalum (also known as coltan) for laptops and smartphones. In countries like the DRC, where coltan reserves are plentiful, mining practices often involve the exploitation of children, who are subjected to horrendous working conditions.
Despite Secretary Mnuchin’s calls, actually repealing the CEO-to-worker pay gap rule and the conflict mineral disclosure rule would require Congressional action.
Matthew P. Robbins is a freelance economics contributor covering wages, budgets, and taxes. He lives in Chicago, Illinois with his husband and two cats.