The brand new management of the United Auto Employees is demanding that the Massive Three automakers give its members a 40 p.c elevate over the 4 years of its subsequent contract. The demand stems from the 40 p.c improve in compensation raked in by the companies’ CEOs over the previous 4 years.

Solely truthful, proper? 

Once I graduated from school, the pay ratio of CEOs to the everyday employee was 20-to-one. In 1992, after I urged candidate Invoice Clinton to suggest that companies shouldn’t have the ability to deduct CEO pay exceeding $1 million from their taxable earnings, the ratio was 100-to-one. 

After being elected, Clinton — on the behest of financial advisor Robert Rubin, former CEO of Goldman Sachs — allowed companies to deduct CEO pay of any quantity so long as the pay was tied to inventory efficiency. 

From then on, CEOs had been compensated with lavish inventory choices and grants. They used company income to purchase again shares of inventory, and the inventory market took off. 

That blew the lid off their compensation packages. Now the ratio of CEO pay to that of the everyday employee is manner over 300-to-one. 

Even when the Massive Three conform to the UAW’s demand, it wouldn’t shrink the mammoth pay packages going to their CEOs. It will solely restrict the share development of CEO compensation to the identical proportion development of their staff’ pay. Since each teams are ranging from such radically completely different bases, it wouldn’t even scale back the widening pay hole between them. 

However it might at the very least convey renewed consideration to the shameless scandal of CEO pay. 

Most Individuals already assume CEOs are overpaid however imagine they’re making solely a fraction of what they’re truly raking in. In response to a 2016 survey by the Stanford Enterprise Faculty, Individuals assume CEOs are pulling in roughly a tenth of what they’re truly making, and that the suitable ratio between CEO and median employee pay must be 6-to-one. (Once more, it’s greater than 300-to-one.)

The UAW’s efforts may thereby rekindle a debate the astounding inequalities of this second Gilded Age, when billionaires inhabit 25-bedroom mansions whereas legions of homeless camp below freeways and most younger staff can’t afford a downpayment on a home. 

Anybody for a wealth tax?

This text was revealed at Robert Reich’s Substack