In America, the rich get richer and the poor get poorer, and along the way the once cherished American middle class got stuffed. According the ALF-CIO, America sees one of the largest CEO to average worker income gaps in the world with American CEOs pocketing more than $12 million annually while the average American worker brings in just over $34 thousand annually.
Add the fractions, carry the 1 and you have a pay rate difference of astronomical proportions – the average American CEO, in 2012, made around 202.3 times more than the average worker, according to the Economic Policy Institute. The numbers measured in 2012 follow a trend set after the 1960s and one that saw a raw uptick in the 1980s, when the United States entered a dangerous era of trickle-down economic theory – the idea of offering tax breaks to the wealthy in hopes that their newfound wealth would contribute to a better economy as a whole, and therefore improve the lives of everyone else (read: the poor). Perhaps this tax theory did not directly cause income gaps to grow as shown, but it did set a precedent for vast wealth disparity in the United States as evident by CEO to average employee pay rates.
From 1978 to 2012, CEO compensation increased at a rate of about 875 percent while the typical worker’s compensation increased at a rate of 5.4 percent. In 1965 the American CEO earned 18.3 times more than typical workers. In 1978, CEOs earned 26.5 times more than typical workers. In 2000, CEO to average worker pay ratios peaked at 411.3-to-1 before dropping and plateauing at what is seen today.
The worst part? Americans have no idea.
In a recent study of 1,581 American participants conducted by Michael Norton of the Harvard Business School, Americans believe the average CEO to average worker compensation sits at 30-1, enormously undercutting the actual numbers. Worse, when asked what they thought was a fair differential; the same group said the ideal ratio should sit closer to 7-1. A reminder that the current number sits near 202.3-1 in America. The American ideal, and the level of American knowledge on the subject are thoroughly bent over by reality.
Perhaps New Zealand Labour Party MP Damien O’Connor put a better description on trickle-down economics and what now appears to be government-sponsored wealth disparity when he described this economic theory as “the rich pissing on the poor.”
So, as the rich have clearly gotten richer, and the poorer have been glued to that classification, the middle class has not found a balance, and many former white-picket fence owners find their way of living harder to uphold as they slip in the ranks. According to a 2014 Pew Research Center survey, Americans who identify as “middle class” has never been lower – dropping to 44% from 53% in 2008. Have those percentages risen? No. Those identifying as low middle class rose from 25% in 2008 to 40% in 2014.
As the rich zip up and the poor clean up, it can be sure that the American middle class will continue to shrink until politicians, companies and the average American worker raise the proverbial pitchfork at absurd American economic policies and trends, continued tax breaks to the wealthy and the slipping financial middle class that was once celebrated in the United States.