Super-Sized CEO Pay Fuels Income Inequality That Hollows Out Middle Class

The next time you order a burger at the drive-thru, think about this: The CEO of the fast-food joint makes more than 543 times the worker serving your food. Put another way, for an eight-hour shift, the single mom who is working the fryer is bringing home about $72. The CEO of that company, profiting off her back, gets about $14,000 for sitting in his cushy corner office barking orders at an unfortunate assistant.

The total compensation ratio, including benefits, is even more obscene. Fast-food CEOs receive on average more than 1,000 times the compensation of their workers.

This disparity isn’t the exception in the fast-food world; it’s the rule according to a new report Demos.

Among the report’s key findings:

  •  In 2012, the compensation of fast food CEOs was more than 1,200 times the earnings of the average fast food worker. Proxy disclosures recently released fast food companies reveal that the ratio remained above 1,000-to-1 in 2013.
  • Pay disparity in the fast food industry is a result of two factors: escalating payments to corporate CEOs and stagnant poverty-level wages received typical workers in the industry.
  •  Fast-food CEOs are some of the highest paid in America. The average CEO at fast-food companies earned $23.8 million in 2013, more than quadruple the average from 2000 in real terms.
  • Fast food workers are the lowest paid in the economy. The average hourly wage of fast food employees is $9.09, or less than $19,000 per year for a full-time worker, though most fast food workers do not get full-time hours. Their wages have increased just 0.3 percent in real dollars since 2000.

A new report the AFL-CIO confirms fast-food isn’t the only industry in which the CEO-to-worker pay ratio has gone haywire. According to the AFL-CIO’s Executive PayWatch, it’s 331 times better to be a CEO than a worker based on 2013 pay statistics. Walmart’s CEO Michael Duke received $20,693,545 in total compensation last year. PayWatch points out that a minimum wage worker at Walmart would have had to work 1,372 hours just to earn what Duke made in an hour.

And what’s the cost to taxpayers when CEOs take the whole pie and leave workers to fight over the crumbs? Huge. Taxpayers like us are subsidizing outrageous CEO pay to the tune of hundreds of millions of dollars every year because profits are all going to the top, leaving workers no other choice but to rely on public assistance just to meet basic needs like keeping food on the table. When CEOs cut retirement and health care to pad their own pockets, workers live in a constant state of insecurity, which affects everything from consumer spending to productivity.

It’s time to rein-out-of-control CEO pay and put some balance back in the economy. As usual, California is leading the way. The California Labor Federation is partnering with former Labor Secretary Robert Reich and other advocates for a fair economy to support SB 1372, which sets corporate tax rates to the CEO-to-worker pay ratio.

According to Reich, SB 1372, authored State senators Mark DeSaulnier and Loni Hancock, is a simple, common-sense solution: Corporations with low pay ratios get a tax break. Those with high ratios get a tax increase.


For example, if the CEO makes 100 times the median worker in the company, the company’s tax rate drops from the current 8.8 percent down to 8 percent. If the CEO makes 25 times the pay of the typical worker, the tax rate goes down to 7 percent.

On the other hand, corporations with big disparities face higher taxes. If the CEO makes 200 times the typical employee, the tax rate goes to 9.5 percent; 400 times, to 13 percent.

We’ll be blogging more on SB 1372 in coming days. Stay tuned to Labor’s Edge for the latest on out-of-whack CEO pay and the labor movement’s efforts to rein it in.