Income inequality in the US has existed for centuries. It is a source of numerous problems in the US, such as poverty, homelessness, and crime rates (Keeley, 2021). Despite being a source of these problems, wealth inequality has gotten much worse in the US since the 1970s. One major source of this change in inequality is the massive change in how much the average CEO is paid compared to the average full-time employee. According to the Economic Policy Institute, the ratio of the average CEO income to the average employee income in 1965 was about 21 to 1. In 2020, the ratio of average CEO pay to average employee pay was 351 to 1, with the average CEO making $24,200,000 annually (Mishel & Kandra, 2021). Meanwhile, according to the Center for Economic Policy and Research (CEPR), the minimum wage, if adjusted for inflation, has actually declined since 1968, when the minimum wage was $1.60 an hour or $12 an hour after factoring in inflation (Baker, 2021). This massive disparity in wages, along with the increasing costs of goods due to inflation, has resulted in many workers, especially in the service and hospitality industry, to at best, be able to survive at a subsistence level and at worst, not be able to afford the cost of living in their state without assistance or without sharing the cost of living with others. In fact, as of 2020, in every state other than Arizona, the minimum wage in each state is not enough to pay for the average cost of living by yourself in that state without having a second source of income. (Divvy, 2020)
Table showing states by the ability of its minimum wage to pay for the cost of living
This prevents anyone without post-secondary education or skills in a trade from surviving off of a single job and significantly contributes to homelessness and poverty in the United States. Not only that, but people who want to survive off of their own income could very easily rationalize committing crimes to increase their income, especially after seeing statistics like the average CEO-to-worker pay ratio. This inability to survive off of a single job is unacceptable and could be considered theft from workers, as their pay hasn’t risen at anywhere near the level their employer’s income has. In fact, according to the CEPR, if the minimum wage had risen with productivity since 1948, it would be $24 an hour or $49,920 a year today.
Graph showing minimum wage in 2020 dollars and what the minimum wage would be if it rose with productivity
For some people, such as myself, this is more money than their parents made combined. Unfortunately, there is a lot of opposition to raising the minimum wage to even a subsistence level, let alone raising it to account for productivity. In my own experiences with discussing an increase in the minimum wage, I often hear the arguments that small businesses couldn’t survive paying that wage or that these minimum wage jobs are designed as starter jobs for high school students. These arguments establish employees at these jobs as an other who don’t deserve to be able to live off of their own income and often ignore the harsh reality that many people, such as students and the recently unemployed, may have to work at a minimum wage job.
Keeley, Brian (2015), “How does income inequality affect our lives?”, in Income Inequality: The Gap between Rich and Poor, OECD Publishing, Paris.
Mishel, Lawrence, and Jori Kandra. “CEO Pay Has Skyrocketed 1,322% since 1978: CEOS Were Paid 351 Times as Much as a Typical Worker in 2020.” Economic Policy Institute, Economic Policy Institute, 10 Aug. 2021, https://www.epi.org/publication/ceo-pay-in-2020/.
Baker, Dean. “This Is What Minimum Wage Would Be If It Kept Pace with Productivity.” CEPR, Center for Economic and Policy Research, 4 Feb. 2020, https://cepr.net/this-is-what-minimum-wage-would-be-if-it-kept-pace-with-productivity/.
“Minimum Wage vs. Cost of Living by State.” Divvy, Divvy, 4 Mar. 2020, https://getdivvy.com/blog/minimum-wage-vs-living-wage/.
I enjoyed learning throughout reading your showcased systemic injustice. I found it interesting that the history of the ratio of pay between a CEO and a full-time employee is so far off and has continued to increase. I think it is sad that majority of states have such a low minimum wage except Arizona that people because homeless and can not support themselves. It is also sad that people may even have to resort to criminal activity to support themselves which is not okay and a new solution should be recognized.
I really enjoyed your presentation. The small business not being able to pay their employees snippet you mentioned is really interesting to me. Business production and wage trends are so vastly unaligned. Higher pay has been proven to increase productivity and morale. Meaning that if you pay your workers more, they’re going to do a better job, making you more money, and be happier. Which also decreases your turn over rate. Also, laborers are consumers—so that money is going to end up being put back into local economies. Giving small businesses more money.
Your statistics on CEO pay is also a great point. The trends of CEO pay over the years has increased exponentially in the last 30 years. CEOs are making so much more than their employees. Businesses have the money to pay people more—they’re just using the money to pay CEOs. Redistribution of profits could solve a lot of the issues that critics bring up.