Workers won applause last year for weathering uncertainty and in some cases risking their lives through the worst of the pandemic — but chief executives won a bigger boost in pay.
The CEO-to-worker pay ratio, which measures the size of a chief executive's compensation compared with that of a median employee at his or her company, rose to 299-1 last year, according to a study released earlier this month by the nation's largest union federation, AFL-CIO.
The expanding gap between CEO and worker pay came as the average S&P 500 CEO’s compensation grew over $700,000 to reach $15.5 million, the study found.
Liz Shuler, the secretary-treasurer of AFL-CIO, told Yahoo Finance in a recent interview that the CEO-to-worker pay ratio has risen dramatically during the pandemic, describing the trend as a symptom of "runaway inequality."
"The imbalance in our economy between the pay of CEOs and working people is skyrocketing — it's out of whack," says Shuler, the second-highest ranking officer at a coalition representing 56 unions and 12.5 million workers nationwide. "It continues to go up, up, up."
"In a time where workers are making sacrifices on the front lines of this pandemic — they're being called essential — we need to make sure that we're rewarding workers by making that gap shrink, not expand," she adds.
The CEO-to-worker pay ratio of 299-1 last year marked an increase from 264-1 the year prior, Shuler said.
The rise in average CEO compensation coincides with an explosion in income among the nation's top-earning CEOs and its wealthiest individuals.
Eight of the highest-earning executives each received compensation last year worth more than $100 million. In 2019, only one executive reached that threshold, according to a survey conducted by consulting firm Equilar for The New York Times.
Moreover, the richest 1% of Americans own roughly 16 times more wealth than the bottom 50%, Federal Reserve data for the first quarter of 2021 showed.
"We think the pay ratio is actually a symptom of a larger problem that's going on in our economy — that runaway CEO pay is a symptom of a larger problem, and that's runaway inequality," Shuler says.
The remarks from Shuler come as Democrats in Congress weigh new laws that would cap or redistribute the wealth of high-paid executives. A proposal backed by 100 House Democrats last year would limit compensation by mandating a ratio between CEO and employee pay at a given company.
Plus, President Joe Biden has proposed tax hikes on the wealthy that would increase the top individual income tax rate to 39.6% from 37%, tax capital gains as normal income for households making more than $1 million, and close the carried interest loophole.
Senate Democrats also plan to add provisions from a union-backed labor proposal, the PRO Act, to the infrastructure bill that the chamber aims to pass on a party-line vote through reconciliation, a parliamentary maneuver that allows legislation to move forward with a majority of the chamber rather than the 60-vote threshold necessary to overcome the filibuster.
Because reconciliation requires budget-related measures, Democrats have focused on the inclusion of a PRO Act provision that would increase the fines levied on companies that violate labor law. AFL-CIO is among the unions that support the move.
"Right now, labor laws are so broken that workers get fired, they're intimidated or harassed if they want to form a union," Shuler says.
"So with the PRO Act, it would remove the fear and bring back that sense of empowerment to working people so that they can actually have a say in the wealth that they are creating for all these companies and these CEOs," she adds.