A reader sent me the graph below (thanks, PK). Kinda’ makes one wish they were a “CEO.” I am a great fan of graphs, but only those that advance our understanding. Does the graph actually depict the average salary of a CEO? As it turns out the graph and the following statistics were “researched” by the largest labor union. Democrat candidates for the presidency like to quote these statistics.
Report: CEOs Earn 331 Times As Much As Average Workers, 774 Times As Much As Minimum Wage Earners. The AFL-CIO “has data” stating that American CEOs earned an average of $12.3 million – an eye-popping 331 times the average worker’s $46, 400.
And now “the graph”:
However, let’s move into the realm of reality. The American Enterprise Institute, in an article by Mark J. Perry, gives us the straight scoop. The average US CEO last year made only $178,400 (about the same as a dentist), and got a raise of less than 1% (the average wage increase for all workers was 1.4%).
|Occupation||Average Annual Wage|
|Average for All Workers||$46,440|
So from where did the graph and statistics proselytized by the AFL-CIO materialize? The graph reports the salaries of the top 200 CEOs among the S&P 500 companies. The Democrat candidates wring their hands and criticize the “excessive CEO compensation.” They inevitably compare rising CEO salaries to stagnant pay for average workers, and how that contributes to rising income inequality, etc.
According to the US Census, there are more than 27 million private firms in the US. So, do the top 200 firms reported in the above statistic constitute a representative sample? Hardly! The “sample” constitutes only one of every 135,000 private firms in the US, or 0.00074% (less than 1/1000 of 1%).
The chart provided above gives a more accurate and complete picture of CEO compensation by looking at wage data from the Bureau of Labor Statistics (BLS) in its annual report on Occupational Employment and Wages. The BLS report provides “employment and wage estimates by area and by industry for wage and salary workers in 22 major occupational groups,” including the category “chief executives.” The BLS reports that the average pay for America’s 248,760 chief executives (not just the 200 highest paid) was only $178,400. Let me ask if you have heard Bernie rail against “excessive orthodontist compensation?”
Like virtually everything that emanates from the mouths of Hillary and Bernie, it is distorted. We should applaud the richest 200 CEOs as a group of the most successful American business professionals, and not vilify them. And we should keep in mind that they are an outlier, elite group, and not representative of the average CEO in America.