Low-wage workers kept the economy running during the pandemic by stocking shelves and manning cash registers, but they did not reap the rewards of their efforts, a new study says.
Instead, compensation for corporate executives, most of whom were already wealthy, pulled further away from their employees, according to the Institute for Policy Studies.
The gap between pay for line workers and corporate executives widened during 2021, according to the institute’s 28th annual study, Executive Excess 2022, released today.
“The report tells a story that is disturbing,” Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, co-author of the report and co-editor of the IPS website, said in an interview. “During the pandemic, corporate boards bent over backwards to protect executives, while workers were struggling. Worker pay did not even keep pace with inflation, while executive pay surged.”
According to the institute, “The report reveals staggering statistics on how low-wage corporations have continued to pump up CEO pay during the pandemic.”
“So much for the hope that the heroic, pandemic-time sacrifices of low-wage workers would lead to a corporate rethinking on pay equity. Instead, executive compensation has climbed further into the stratosphere while inflation has stripped away the earnings gains of most U.S. workers,” the study said. The study included 300 large, U.S.-based public companies that are required to publicly report executive pay and had the lowest median pay in 2020.
The study found that the average gap between CEO and median worker pay jumped to 670-to-1 last year, up from 604-to-1 in 2020. Forty-nine firms had ratios above 1,000-to-1. At the same time, CEO pay increased by $2.5 million to an average of $10.6 million, while median worker pay increased by only $3,556 to an average of $23,968. At 106 of the 300 companies worker pay increases did not keep pace with inflation.
In addition to executive pay, the other crucial factor to consider for these companies is the huge amounts of money spent on stock buybacks, Anderson said. That money could have been used for improvements at the firms or wage increases for employees, she said.
At the 106 companies in the sample where median worker pay did not keep pace with inflation, 67 spent money on stock buybacks, “a maneuver that inflates executive stock-based pay. These repurchases totaled $43.7 billion,” the study said. “The biggest buyback firm was Lowe’s. With the $13 billion the retailer spent on share repurchases, the company could have given each of its 325,000 employees a $40,000 raise. Instead, median pay at the company fell 7.6 percent to $22,697.”
The three companies with the largest pay gaps were Amazon, cosmetics company Estee Lauder and gambling giant Penn National Gaming. Amazon’s new CEO, “Andy Jassy, raked in $212.7 million last year, mostly in stock awards, making him the highest-paid CEO in the sample. Jassy’s pay amounts to 6,474 times the $32,855 take-home of Amazon’s most typical 2021 worker,” the study said.