KANSAS CITY, Mo.—The wage gap between the rich and the rest of us—specifically between Fortune 500 CEOs and everyone else—is even wider than people realize, unionists learned at a combination live and Zoom session from Kansas City, Mo.
Host Judy Ancel, head of worker education and labor studies at the University of Missouri-Kansas City, told the group that if you compare the median compensation of a Fortune 500 CEO to that of an average worker, what was a 20-1 ratio in 1970 is now 802-1. The median is the point where half of a group is above and half below.
That’s three times the ratio in the AFL-CIO’s Paywatch, which covers median compensation between workers and a wider group of corporate executives. All the ratios are based on federal data. But regardless of which executive group is used, the pay gap is now a chasm.
Based on a book, Wall Street’s War On Workers, by Les Leopold, the Reversing Runaway Inequality session discussed diverse causes for the wide divide, including:
- A shift in the nature of CEO compensation. Before 1970, CEOs were paid like average workers were paid: Salary plus bonuses, all of it taxable and at higher income tax rates than exist now.
Since then, Congress, yielding to corporate lobbying and campaign cash, cut tax rates. Meanwhile, again due to corporate influence, the government legalized two additional ways execs could get paid: Stock buybacks and deferred compensation. They’re unavailable to the average worker. Buybacks, “which used to be illegal,” and deferrals now make up 83.6% of CEO compensation, Ancel said.
- The financialization of the economy. Again, the shift began just after 1970 and it’s tied to the buybacks. Those incentives push executives, from CEOs on down, to respond to Wall Street investors first and foremost—not to communities and not to workers. Buybacks also drive up CEO wealth, as each share is more expensive and thus more valuable.
Finance, insurance, and real estate now account for 21.2% of gross domestic product, federal figures show. It’s the largest sector. Health care is second, at 17.6%.
So, excess corporate cash, profits that used to be plowed back into improving companies, or even paying workers, now gets pocketed by CEOs, board members, and financiers. “In 1981, 2% of profits were used to buy back stock. By 2017, it was 75%,” Ancel, explaining charts, said.
John Deere, the farm equipment manufacturer whose employees are unionized with the Auto Workers, “spent over $7.2 billion” of its profits “on stock buybacks in 2023—and it moved a whole hunk of jobs to Mexico.”
- Within financialization, a rising share of the corporate economy is “off the books,” to the detriment of workers. Leopold devotes a whole chapter to private hedge funds accountable only to their creators and investors, unregulated by the Securities and Exchange Commission.
Hedge funds swoop in
Hedge funds swoop into companies, buy them up—often plunging them deep into debt to do so—then strip them bare, downsize them, and close them. Families and communities suffer collective financial and emotional trauma. The hedge funds walk away with the proceeds.
The funds call themselves “venture capital,” one participant noted. Their victims, in the news business, health care, and elsewhere, refer to them as “vulture capital.”
- Corporate influence brought government inaction against monopolies and oligopolies. One participant cited the nation’s health care “system,” including a handful of large private for-profit insurers dominating the market and setting prices for coverage and payments to providers.
“The fact we have a for-profit health care system impoverishes the rest of us while CEOs get wealthy,” he said. National Nurses United has made that point for years, as part of its long campaign for Medicare For All, single-payer government-run national health care. It says single-payer would be cheaper, more efficient, and would get rid of the insurers, the CEOs, and their profiteering.
- Worker productivity rose. Workers’ wages didn’t. After discounting for inflation, they’ve been flat since 1972. Productivity paced wages until then. It’s tripled since. Productivity increases equal corporate profit increases equals more money for corporate executives.
“This is more extremely skewed than ever,” Ancel commented. “This is the greatest heist in our history, going on right under our noses—and it’s been doing so for 40 or 50 years.
“How did they get away with it? And why did we allow it?”
Participants in the hour-and-a-half session spent it delving into answers to those two questions. Solutions to the inequality will be discussed at future sessions. All are at KKFI.org public radio.
- One big answer, shown by evidence including the John Deere figures, was firms increasing profits at the expense of U.S. workers by literally packing up their shops and moving to nations with exploitable labor forces, low wages, little regulation, and few environmental standards. The corporate class used “free trade” treaties, which it negotiated behind closed doors through the U.S. government, to leverage that exploitation.
- Another was a steep decline in private-sector unionization. It peaked at just over 35% in the mid-1950s, one graphic showed, at a time when public sector unionization was virtually nil.
Private-sector union density slowly declined through 1980, to just over 20%, as the union movement stopped organizing workers and the economy changed from an industrial base to a services base. Meanwhile, the public sector started to organize in the 1960s and since then.
Fewer workers unionized
Now, fewer than 7% of all private-sector workers are unionized, compared to at least 35% of public-sector workers. In absolute numbers, private-sector unionists still outnumber their public colleagues, because the private sector is so much larger overall. “But now the public sector is under attack by the Trump administration,” Ancel pointed out.
- The AFL-CIO shut down its Education Department in 1998, and many unions followed suit.
That department could pump out the data and its implications. With no information from the union side, more and more workers, fed corporate information with no counter, “vote against their own economic interests,” several people said.
- Participant McKenzie Sloan noted corporate propaganda is so overwhelming that “members of the working class don’t have a class consciousness.” Meanwhile, people earning $1 million a year “feel they’re in the middle class,” he said drily. Data show that the group is in the top 5%.
“Not only do they [workers] lack class-consciousness, but they don’t have a political party that fights for them.” The Republicans, participants noted, have been the corporate party for at least a century. And corporate campaign cash and clout co-opted many Democrats in the last several decades.
- The corporate class also uses its financial clout politically to get lawmakers to enact tax gimmicks which benefit it at the expense of the rest of us, Sloan added.
“Stock options are taxed at a lower rate. And Elon Musk and Jeff Bezos”—two of the nation’s wealthiest people—“live off interest they receive from ‘loans’ they made to their own companies. It’s a tax scam.” The loan income is taxed at lower top rates than ordinary wage income.
- One participant cited another big reason for the overwhelming corporate sway: An influential 1971 memo to the U.S. Chamber of Commerce from attorney Lewis Powell, written just before Republican President Richard Nixon named Powell to the U.S. Supreme Court. Leopold’s book devotes an entire chapter to the Powell memo.
Powell told the Chamber that to regain its clout over the government and economic decision-making, it had to implement a wide corporate-oriented information, lobbying, and influence structure. The Chamber feared it was losing ground to “radical” workers, students, people of color, and academics.
That structure, Powell wrote, should include think tanks, pro-corporate “experts” who could churn out supposedly “objective” studies—without revealing who paid–coordinated lobbying, close cooperation with state as well as federal legislators and a constant commercial drumbeat selling consumers they too could achieve “The American Dream” through individualism, not cooperation, i.e. unions.
The Chamber took that memo, had right-wing foundations pump in millions of dollars to set up such a structure, and has run with it ever since.
- The Chamber’s campaign, another participant said, was augmented when GOP President Ronald Reagan, a decade later, fired all the unionized air traffic controllers, an obvious signal to the corporate class that it was open season on unions.
- That prompted a discussion of overall weakness of U.S. labor law. Until the last few years, labor’s ultimate economic weapon, the strike, was virtually impossible. Republican-run Congresses and courts and GOP-named National Labor Relations Board appointees have emasculated the law since 1947. Firms also employ divide-and-conquer corporate tactics.
“How much can they force you to give in because you can’t strike,” because bosses “pit Black versus white,” because employers exploit women who must become wage-earners out of necessity, “or because the factory’s moving to Mexico?” one participant asked.
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