As noted yesterday, I’m working on a longer piece about sky-high salaries—merit vs. “rents”—so I was interested to see this piece (“Invasion of the Supersalaries”—nice!) in the NYT this AM. That piece reports that “the median compensation of a chief executive in 2013 was $13.9 million, up 9 percent from 2012…” I’m assuming that 9% is nominal (not inflation adjusted) but according to the BLS, nominal median weekly earnings for regular old full-time workers not from the exec suites went up about 1% last year, which was actually a bit behind inflation (1.5%; see table 7; we’re talking about $40,000/year).
So, the bakers are once again getting smaller slices of the pie.
A related observation came to mind today as I working through Thomas Piketty’s incredible new book on inequality (the fact that it’s already a best seller gives me more hope for the future of this critical debate than almost anything else I can think of in recent years).
What with the rise and fall and inexorable rise again of financial markets in recent decades, many people who think about this believe that it is the rise of capital incomes, like capital gains, that’s the primary factor driving US inequality upwards.
Not so (though with an asterisk). The figure below from Piketty’s book shows the increase in the share of US income going to the top 10%, i.e., the top decile. The increase in the wage share since 1970 is about 10 percentage points, or about two-thirds of the increase. The increase in capital income explains the other third, which ain’t nuttin,’ but the wage story told in the NYT piece and the figure below is still the main driver.
Piketty also shows how the rise in supersalaries has changed the composition of income at the very top. Back in 1929 (the last time inequality was at today’s levels), income from capital comprised the main source of income for the top 1%; today, you’d have to go all the way up to the top 0.1% before capital overtook earnings as the main source of income.
Re that asterisk, labor economist Larry Mishel correctly stresses that stock options are typically counted as part of compensation in this research (which seems right to me) and they’re a growing source of CEOs pay packets. Is that labor income or capital income? Somewhere in between, I’d say, but certainly connected to work.
Source: Piketty (2014, Fig 8.7)