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Minimum Wage versus CEO compensation

Posted By Barry Ritholtz On September 24, 2003 @ 3:17 pm In Finance | Comments Disabled

Marc Brazeau of Blogonaut [1] asks the following question:

The minimum wage expressed in 2000 dollars had a value of $7.80 in 1968, $6.80 in 1979 and $4.75 today.

During the period 1990-1999, corporate profits rose 117.4 percent, the S&P 500 rose 297 percent, and CEO pay rose 535 percent. During the same period, average worker pay rose 32 percent;

According to Fortune magazine, median compensation for chief executives at 100 of the largest companies rose 14 percent — to $13.2 million — in 2002. The average chief executive is now paid 282 times what the average worker is paid, up from a 42 to 1 ratio in 1982. Still, that multiple is down from the peak of 531 to 1 in 2000.

“If the minimum wage, which stood at $3.80 an hour in 1990, had grown at the same rate as CEO pay, it would have been $21.41 an hour in 2001, rather than the current $5.15 an hour,” the (Merill Lynch) report said.

Two common arguments against raising the minimum wage are possible inflationary effects and job loss. Why aren’t these issues raised in relation to executive compensation? “

Discuss.


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[1] Blogonaut: http://marcbrazeau.blogspot.com/

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