Former U.S. Secretary of Labor Robert Reich reignited the national conversation about pay inequality with a pointed observation on X:
“CEO pay is up 1,085% since 1978, while typical worker pay is up just 24%. Why do we always hear ‘we can’t afford to pay our workers more’ but never ‘we can’t afford to pay our CEO more’?”
Reich’s claim is backed by data from the Economic Policy Institute (EPI), which shows that between 1978 and 2023, the average CEO’s realized compensation rose by 1,085% when adjusted for inflation. In that same period, a typical worker’s compensation rose by just 24%.
The gap is even more stark when looking at pay ratios. In 1965, CEOs earned about 21 times more than the average worker. By 2023, that figure had ballooned to 290 times more.
The EPI explains this dramatic shift isn’t about CEOs getting that much better at their jobs. Instead, it reflects their growing power to set their own pay with little oversight.
“CEOs are getting paid more because of their leverage over corporate boards, not because of their skills or contributions,” the report states.
Not Just High—Outpacing Even Other Top Earners
CEO compensation has not only outpaced typical workers’ wages, but it has even grown faster than the earnings of the top 0.1% of all U.S. wage earners.
In 2022, CEOs earned 9.4 times more than this already elite group, up from just 2.6 times more during the 1965–1978 period.
This gap signals what economists call “rent seeking”, a term for when someone earns more due to their power or position, not necessarily because they contribute more value.
According to the EPI, this suggests “there would be no adverse impact on the economy’s output or on employment if CEOs earned less or were taxed more.”
CEO Pay Dropped Slightly in 2023, but Remains Sky-High
Interestingly, CEO pay actually declined in 2023. Realized compensation fell by 19% from the previous year, while the value of stock options and grants dropped 14%.
Even with that dip, the average CEO at a top U.S. firm still earned over $22 million in 2023. And nearly 78% of that pay came from stock-related compensation, mainly vested stock awards.
Over time, companies have shifted from using stock options to stock awards, which are seen as slightly more tied to long-term performance.
Still, the overall takeaway from the EPI is that the system heavily rewards those at the very top, regardless of how well the company or broader economy performs.
A Driver of Inequality
The rise in CEO pay is more than just a corporate issue. It’s also a major factor behind growing income inequality in the U.S.
The EPI report notes that wages for the bottom 90% of workers have stagnated in comparison. If inequality hadn’t gotten worse since 1979, everyday workers would likely be earning around 16% more today.
But instead, most of the income growth has flowed to the top 1%, especially the top 0.1%.
That gap isn’t just about bragging rights, it reflects real money that could have helped boost paychecks for millions of people.
Policy Ideas to Fix the Gap
The EPI suggests a few ways to help close the gap:
- Raise taxes on the highest earners
- Increase taxes on companies with large gaps between CEO and worker pay
- Give shareholders more influence over how much executives get paid
- Enforce rules that reduce the power of giant corporations
These ideas are meant to reduce the outsized rewards at the top and help shift more income toward everyday workers.
Reich’s post sparked renewed attention on these issues because it points to something that feels obvious to many Americans: corporate priorities are skewed.
As Reich asked, why is it that we always hear about how expensive it is to pay workers fairly, but never about the cost of keeping CEO pay so high?
The data supports his question. And unless the balance shifts, the divide between the boardroom and the break room will likely keep growing.
IMAGE CREDIT: “Robert Reich” by Albaum, CC0 1.0, via Wikimedia Commons. Image adjusted for layout.