CEOs Now Earn $7,000 per Hour (350x Employ Wages)

CEO compensation at the nation’s 327 largest companies now averages $7,000 per hour or 350 times what the typical employee earns, according to new data from the AFL-CIO. This includes salaries, bonuses, perks, stock awards, stock options and other incentives.

Google CEO Eric Schmidt has a total annual compensation of nearly $101 million, or $48,548 per hour, more than the average worker makes in an entire a year ($35,204). Other top earning bosses include Oracle chief, Larry Ellison, who brings in $96.2 million per year, Leslie Moonves, (CBS), who makes $69.9 million per year, and seven others with compensation packages exceeding $40 million per year.

Money Morning writes that “most people agree” that CEOs deserve “substantially” more money than their employees. While they do not provide any data to support this claim, it is plausible considering such comments are routinely made by the media and politicians. Yet the explanations people give for why bosses deserve substantially (or any) more than their employees are irrational and unsupported by the evidence. Workers (not CEOs) do all of the heavy lifting in any workplace. CEOs primarily just make decisions about how to run the workplace, decisions that workers are much better equipped to make based on their experience and expertise (assuming the goals are to make the business run in a way that is safer for workers and the environment, that provides better quality and value for consumers, and that makes the world a better place for the majority of its people).

Of course the CEOs and other bosses do not care about any of those things. The only thing that counts are profits, which are made by paying workers as little as possible. They accumulate and maintain their power and wealth precisely because of their relationship to the means of production. As the owners, they get to make the rules, including how much to pay themselves (and how little to pay us). The greater the profits, the more valuable the CEO becomes to the shareholders and therefore the more he can demand in pay. Since lowering labor costs increases profits, the tendency is for the wage gap to continually grow, particularly during recessions (when workers are laid off or their wages are slashed more than usual)—a tendency that generally continues unchecked until labor successfully fights for wage increases, something that has not happened on any scale in over a generation.

Contrary to popular thought, shaming CEOs or legislating pay limits have very limited effect. Why should Eric Schmidt or Larry Ellison care what we think. They never have to sit next to us at the diner or wait in line with us at Walmart. (Larry Ellison, by the way, had his mansion reassessed shortly after the housing market collapse, costing several San Francisco Bay Area school districts millions of dollars in lost revenues). If it was possible to shame him, you would think the affected teachers’ unions would have done it.

As we saw with the subprime lending crisis, any attempts by Congress to limit executive pay were met by cries that this would limit competitiveness, which we are constantly told is essential for job creation, which of course is the only conceivable way to ensure we all have enough to eat, adequate health care and a roof over our heads. The notion of bailing out homeowners was never a possibility, even though this would have kept far more people in their homes than the alternative of bailing out the banks. The former solution is unacceptable because it uses tax dollars (including a sizable share contributed by the wealthy) to help working and middle class people, rather than the usual practice of funneling the money into private business. Worse, had the banks not been bailed out, many very wealthy individuals would have lost money, something else that cannot be tolerated.

We Don’t Need New Standards

The standard assumption about standards, regardless of politics, is that standards are a necessary and pedagogically important part of education. After all, if we didn’t have standards for each discipline, then teachers could teach whatever they wanted. There would be chaos. There would be no equity. Some kids would get a better education than others. A recent piece in Good Education adds several other supposedly important benefits, such as providing a vision, or a “destination for learning,” and a “common language” for educators and parents.

Yet isn’t it possible to provide a high quality education without strict adherence to standards? (Many private schools supposedly do this). And are lack of a “common language” and “destination for learning” really key problems in public education?

The article does identify several significant problems with standards (or, more precisely, how we use them). For example, when the standards are tied to high stakes exams—especially those which influence teacher promotions and dismissals or school closures and restructuring—there is an incentive to teach to the test, cut course offerings and reduce instruction in areas that are not tested.  

However, there are deeper problems with standards that the author completely ignores. The most significant of these is that standards do nothing to mitigate the biggest problem with public education: poverty and the growing wealth gap. An achievement gap associated with children’s socioeconomic backgrounds is in place well before children have started kindergarten (see here and here) and tends to grow over time, as lower income students miss out on many of the extracurricular activities enjoyed by affluent children on weekends, holidays and during summer vacation.

Furthermore, the author’s assertion that standards are essential for creating educational equity is simply not true. Having the same standards and expectations for all children, regardless of their skills, academic and social maturity, and support structures at home, merely ensures that some students will fail because of their socioeconomic backgrounds rather than the quality of their schools and teachers. This serves to reinforce social class divisions by helping to sort children for future courses (e.g., advanced placement for affluent students vs. remedial courses for lower income students) and adulthood (e.g., military or blue collar work for lower income students vs. 4-year university and professional career or management for affluent ones).

Another problem is that standards are influenced far more by the needs of the market than by the needs and interests of children or the benefits to society. For example, the current California state standards for biology have completely dropped natural history to make room for more molecular biology. This is due in part to limitations in time—it’s simply impossible to cover all biological topics in one school year. However, the reason for elevating molecular biology over the study of plants, insects, birds, and marine mammals is that the big money and the jobs currently are in biotechnology, not marine biology or entomology.

For many people, natural history is not only more interesting than molecular biology, but it was precisely their experience with natural history in grade school that got them excited about science in the first place. This is not trivial. If we really want kids to like school and to become self-motivated learners, it is important give them more say in what they learn and not merely shove down their throats what the corporate employers say is important.

Additionally, education is about far more than simply learning a prescribed set of standards. Children are also learning how to communicate and collaborate. They are developing soft skills that can help them navigate the adult world. Ideally, they are also learning to be self-motivated learners who can think critically and solve unique problems. A successful molecular biologist, for example, must not only know the names of the enzymes involved in protein synthesis, but also how to design and carry out a controlled experiment, interpret the results, and communicate their analysis to their peers and the general public. Yet content standards and the high stakes exams associated with them rarely emphasize these skills.

The author suggests that the Common Core Standards (CCS) resolve this problem. While CCS do attempt to cover critical thinking and communication, they are, in fact, merely standards—they do not provide the time, resources, education or motivation for teachers to successfully teach them. And as long as they are tied to high stakes tests (which are currently being designed), most of the problems associated with state content standards will persist. At the same time, the implementation of CCS is costly (over $1 billion in California, alone, according to EdSource), taking scarce educational funding away from other, more pressing needs, like renovating or replacing dilapidated facilities and equipment, decreasing class sizes, and providing teachers and other school employees decent wages and benefits.

The author suggests that because CCS emphasize “21st century skills and knowledge that kids need to master in order to be successful,” students will be liberated from rote memorization and regurgitation of facts and teachers will be able to collaborate across disciplines, such as a science teacher and an English teacher having students “compare and contrast Apollo 11 astronauts’ accounts of the first moon landing.” The problem is that the content standards are not disappearing. CCS is being implemented on top of them. Students will still need to know facts. Furthermore, most teachers are not being provided any additional prep periods or paid time in which to collaborate with their colleagues to design new curriculum. Therefore, this sort of collaboration is not likely to increase as a result of CCS and the implementation of CCS, whether done independently or in collaboration with colleagues, will mostly be done on teachers’ own time or it will supplant their other responsibilities.

Youth Poverty At An All-Time High

Empty Pockets (Image by barbaranixon from Flickr)

A new report from the Washington DC-based Urban Institute indicates that the overall percentage of wealth of those in their 20s and 30s has been dropping steadily and is now at its lowest level since records have been kept, the WSWS reports.

The study, “Lost Generation? Wealth Building Among Young Americans,” found that young people aged 29-37 saw a 21% decline in their accrued wealth over the past few decades, while those who are 74 and older saw their wealth increase by 150%. One explanation is that older Americans are more likely to have defined-benefit pensions, which have become increasingly rare for younger workers. Younger workers are also saddled withthe highest amount of student debt ever, with the average 25-year-old owing$25,000. Young people have also been particularly hard hit by the housing crisis and unemployment. The majority of new jobs created since the “recovery” started pay less than $15 per hour. Meanwhile, the number of mortgages held by 25-30 year-olds has dropped from 9% to 4% of all mortgages.

Americans Working Longer, Harder and Paid Less

Huck/Konopacki Labor Cartoons

The working and living standards for the majority of Americans have been on a downward spiral since the 1970s. While workers’ productivity is up, allowing their bosses to bring in greater profits, most workers have been working longer hours and doing more work per hour, while their wages have remained stagnant, according to the recent report State of Working America, 12th Edition (Mishel et al. 2012)

Below are some of the report’s findings (summarized by the Economic Policy Institute, where Mishel is president):

In 2007, the average American worker toiled 1,868 hours, 181 hours longer (10.7% more) than in 1979—the equivalent of an extra 4.5 weeks per year. This growth was most pronounced among women, who are now working 20.3% longer than they did in 1979. However, this is primarily because there were far fewer women being paid for their labor in 1979. Overall, men saw a 4.4% increase in their working hours, and this was primarily over and above what they were already working. There was also a large increase in working hours among the lowest 20% of wage earners, whose working hours increased 22% (compared with a 7.6% increase for the top 5% of earners), again due mostly to hours over and beyond what they were already working.

One reason for the increased working hours was, of course, increased demands by employers. However, workers’ wages were stagnant during the period, in many cases not keeping up with inflation, forcing people to work longer hours to make ends meet. Thus, in terms of spending power and the value of their paychecks, workers living standards were either stagnant or declined during this period.

For example, annual income increased during this time period, but for the majority of workers this was the result of their longer working hours—not from any significant increase in hourly wages. For the lowest-wage workers, hourly wages rose only 7.7% over the past three decades. However, for the past decade, their wages have actually declined 3.2%. In contrast, the hourly wages of the top 5% of wage earners increased by 30.2%, and this does not even include the bulk of their income, which comes from non-wage compensation and investments (e.g., stock options, capital gains).

What little growth American workers have seen in hourly wages was concentrated in the late 1990s, when unemployment was low and the minimum wage was increased. Even for middle wage earners, whose overall hourly wages increased 15.8% between 1979 and 2007, total hourly wage growth was only 5.3% when 1995-2000 is excluded.

America’s Class War Against Youth

Huck/Konopacki Labor Cartoons

If the Occupy Wall Street (OWS) movement accomplished anything it was to focus public anger on America’s extreme and growing wealth gap, portraying it as the product of the greed and selfishness of the richest 1%.

This overly simplistic view obscures the actual socioeconomic relationships that are responsible for the transfer of wealth from the majority to the few, as well as who comprises this “few.”

The wealth gap is actually the by-product and goal of capitalism and the sociopolitical institutions that bolster it. All bosses in private businesses, regardless of how rich they may be, make their profits by paying their employees less than the value of their labor and pocketing this surplus value as profits (i.e., exploitation). The owner and employer classes transfer additional wealth to themselves through a taxation system that allows them to pay a lower effective tax rate than their employees pay, and through a legislative and legal system that facilitates their acquisition of more capital, sometimes even if it injures, sickens or kills others.

Exploitation of workers is the primary source of the wealth gap, particularly between employers and employees and the source of the so-called obscene wealth we see among the “1%.” However, wealth is also transferred from the young to the old, resulting in a growing wealth gap between older Americans and the young.

The wealth gap between younger and older Americans is currently the widest on record. In 1984 Americans who were sixty-five and over made ten times as much as those under the age of thirty-five. By 2008, older Americans were earning nearly forty-seven times as much as the younger age group. (For more, see the following articles in Esquire and Newsweek).

This wealth gap is not small, either. The median net worth of households headed by someone 65 or older has increased 42% since 1984, to a comfortable $170,494, while the median net worth for younger households has declined 68% to a desperate $3,662, according to the Pew Research Center.

The Pew study attributes some of the wealth transfer to timing: The older generation benefited from living and working in a strong economy and a long rise in housing prices. Conversely, older Americans have suffered far less under the current recession, with the median net worth of those under 35 falling 37% between 2005 and 2010, while falling only 13% for those over the age of 65. The recession has also forced many older Americans to continue working longer than they would have in the past, squeezing many younger workers out of jobs. The percentage of the workforce under the age of 25 has declined 13.2% since 2008, while rising 7.6% for those over 55.

However, the trend began decades before the current recession and has been facilitated by changes in government policy, which have been promoted by an aging politician class (today’s Congress is the oldest since World War II). For example, the federal government now spends $480 billion on Medicare, but only $68 billion on education, according to the Esquire article. As a whole, the U.S. government spends 7 times as much on its seniors as it does on its children, per capita, according to a 2009 Brookings Institution study. Mike Males writes that younger workers are currently contributing 15% of their payroll income to pay for Social Security and Medicare payments for seniors, since Congress gutted the Social Security Trust Fund (originally designed to cover future generation’s benefits) to pay for current government needs.

The transfer of wealth from young to old has been a hallmark of the Republican Party and would have been taken to new extremes under the Ryan tax plan. According to Males, younger Americans would have suffered under this plan in direct proportion to how young they are. Virtually every federal program designed to benefit the young and the poor would have been gutted or eliminated, including food stamps, Medicaid and job training. Federal spending on education would have been slashed by one-third. But Social Security and Medicare for today’s seniors would have been preserved. At the same time, median-income households headed by people 55-65 would have received tax breaks of roughly $1,200, while median-income households headed by people under 25 would have lost hundreds of dollars.

However, the Democrats have also contributed to the generational wealth transfer. Under Obama’s 2012 budget, for example, Medicare and Social Security were left alone, while the Adolescent Family Life Program and the Career Pathways Innovation Fund were ended. Likewise, the AmeriCorps program was slashed and had to turn away 75% of applicants last year, while recent changes to the Pell grant program will cost students an estimated $100 billion over the next ten years, according to the Esquire article. Similarly, Obama’s plan for avoiding the “fiscal cliff” involves raising the age of eligibility for Medicare benefits and cutting benefits for future recipients of Medicare and Social Security. In other words, the benefits of today’s seniors would be preserved and subsidized on the backs of today’s youth.

So far I have only discussed the tangible, present-day ways younger Americans have been screwed. They have also been saddled with an enormous debt they will be paying well into the future through higher taxes, reduced benefits and services, and delayed retirement (or no retirement). The per capita debt in the U.S. is now $50,000, with much of it going toward paying for the longest wars in U.S. history (i.e., Iraq and Afghanistan) and huge tax breaks for the wealthy. Yet, the average student also owes $12,700 to the credit card companies and will owe $27,000 to college loans creditors, according to the Newsweek article. And despite incurring all this debt, college graduates’ income has dropped 11% over the last decade for men and 7.6% for women.

While some of this wealth transfer has merely helped middle class baby boomers live comfortable middle class retirements, much of it is really about helping banks, Wall Street investors, and large businesses reap ever larger profits on the backs of youths. Skyrocketing student debt, for example, contributes to the poverty of younger Americans. Yet, Obama’s student debt repayment plan may actually increase debt payments for many students, while his plan to cut spending on higher education by $10 billion could increase student need for loans, thus increasing profits for lenders and the hedge funds that trade students loans.