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Seeing as we were talking about pay ratios… November 26, 2013

Posted by WorldbyStorm in Economy, US Politics.
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…in the wake of the failed Swiss referendum to introduce a statutory cap on CEO pay, this from Bloomberg outlining US pay ratios is instructive in pointing to how bad things can get.

This too is important:

Most companies don’t disclose median worker pay, so Bloomberg calculated ratios based on the U.S. government’s industry-specific averages for pay and benefits of rank-and-file workers.

Let’s also note how there’s almost a taboo on discussing one’s level of pay with others in a workplace (I’ve heard of workplaces where it’s actually forbidden). A situation which is highly convenient for employers. To put it mildly.

And let’s consider how:

…almost three years since Congress directed the Securities and Exchange Commission to require public companies to disclose the ratio of their chief executive officers’ compensation to the median of the rest of their employees’. The agency has yet to produce a rule.

BTW, the above chart doesn’t give a full outline of executive remuneration IIRC. For example, consider this in relation to Apple’s CEO Tim Cook.

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Comments»

1. Statsoid - November 26, 2013

Supremely dumb for this pay ratio to be measured against the median, no?

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WorldbyStorm - November 26, 2013

Fair point. I wonder was that an attempt to very slightly mask the gulf between highest and lowest paid? Interesting that Congress wanted to highlight the median too. Makes their efforts that little less impressive (which they were to begin with but you get my drift).

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Statsoid - November 27, 2013

Well it’s not even a case of very slighly masking that gulf.

Using the median as the baseline for comparison offers absolutely no safety net to the 50% of the workforce who earn below the median. Yet these are exactly the workers that any anti-low-pay measure should be deisgned to protect. In a 10,000-person company, the median salary wouldn’t change one iota if 4,999 workers earned just a peppercorn a year.

Instead such an approach only protects the top-half of earners, exactly those who are already doing well and do not need much or any help.

But I doubt that this reflects a nefarious intent. Rather it’s the typical lack of understanding of basic stats that one sees constantly in the commentariat: “let’s use the average … nah, let’s use the median, that’ll make us sound smarter!”

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WorldbyStorm - November 27, 2013

I think you’re labouring under a misapprehension, it was Congress that sought median figures, Bloomberg uses averages as far as I can make out.

Frankly I’m dubious that it is about wishing to sound smarter.

In any case I wonder is this exercise about safety nets as much as being about attempting to point ultimately to caps. I’d bet that the attitude would be that the minimum wage was the safety net etc and that it is the extravagance of CEO pay that is thd problem. Hence the concentration on caps in the Swiss referendum. Those are very different things for the latter situation as with thd former could still allow for a considerable number of low earners, indeed it could allow for all bar a CEO being lower earners.

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WorldbyStorm - November 27, 2013

Sorry, I should add as well that the class structure of the implied audience is also an issue this being the US and with the specific and particular emphasis on the ‘middle class’… So again small wonder Congress wouldn’t be too fussed about using the median.

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Johnny Forty Coats - November 27, 2013

I can’t imagine anyone would use the median as a sign of sophistication – I can remember learning about “mean, median and mode” in an Intermediate Certificate maths class (showing my age, I know). It’s obvious that reducing wages at the bottom of the scale will depress the mean wage but will have no effect on the median wage. The choice of statistic can’t be accidental.

Has anyone seen a good analysis of why the Swiss referendum was lost? I’d have thought/hoped that such a proposal would have widespread support.

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2. yourcousin - November 27, 2013

Seeing as how income is being discussed. Found this piece of some interest

http://www.politico.com/magazine/story/2013/11/which-side-of-the-barricade-are-you-on-100302.html?ml=po_r

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