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The gap between CEO compensation and median worker pay at Starbucks hit 6,666 to 1 last year.
In other words, to make as much money as their CEO made in 2024, typical baristas would’ve had to start brewing macchiatos around the time humans first invented the wheel.
Starbucks is the worst offender, but jaw-dropping gaps are the norm among America’s leading low-wage corporations. CEOs of the 100 S&P 500 firms with the lowest median wages — a group I call the “Low-Wage 100” — have enjoyed skyrocketing pay over the past six years.
As a group, these CEOs now earn 632 times more than their median employees, I found in a new report for the Institute for Policy Studies. Their pay has risen nearly 35 percent since 2019 in absolute terms, while their median worker pay hasn’t even kept up with the U.S. inflation rate.
CEOs are in effect getting richer while their workers fall further and further behind.
It’s not for lack of cash. Between 2019 and 2024, these firms spent a combined $644 billion on stock buybacks. This once-illegal financial maneuver artificially inflates the value of a company’s stock — and with it, CEO pay. Even the most inept executives can rake in vast fortunes through this scam.
Every dollar spent on buybacks represents a dollar not spent on workers.
The tradeoffs can be downright staggering. At Lowe’s, for instance, every one of their 273,000 employees could’ve gotten an annual $28,456 bonus over the past six years with the money the retailer blew on stock buybacks. Lowe’s median worker pay was just $30,606 last year.
If McDonald’s had spent their buyback outlays on worker bonuses during this period, they could’ve given all their employees an extra $18,338 per year — more than the company’s median wage.
Siphoning resources from workers to make CEOs even richer is especially outrageous when so many Americans are struggling with high costs for groceries, housing, and other essentials.
It’s bad for business too — most of these companies are spending more on buybacks than on vital investments like training employees or upgrading technology, equipment, and properties. And extensive research shows that extreme pay disparities undermine employee morale and boost turnover rates.
As poll after poll after poll has shown, Americans across the political spectrum are fed up with overpaid CEOs and want government action. In one rather amusing recent survey, 80 percent of workers said they view corporate CEOs as overpaid, and nearly 70 percent said they do not believe their own company’s CEO could do the job they do for even one week.
How could policymakers incentivize more equitable pay practices?
They could increase taxes on corporations with huge CEO-worker pay gaps. Polls suggest this would be enormously popular. In one survey of likely voters, 89 percent of Democrats, 77 percent of independents, and 71 percent of Republicans said they’d like to see tax hikes on companies that pay their CEOs more than 50 times what they pay their median employees.
Congress could also increase the 1 percent excise tax on stock buybacks that went into effect in 2023. If that tax had been set at 4 percent, the Low-Wage 100 would have owed approximately $6.3 billion in additional federal taxes on their share repurchases during the past two years. That revenue would’ve been enough to cover the cost of 327,218 public housing units for two years.
Policymakers have ample tools for tackling the problem of runaway CEO pay. Now they just need to listen to their constituents and get the job done.
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