Hello readers,
Today’s blog post is about a widely discussed issue, the salary gap. The current problem at hand revolves around the increasing gap between CEO compensation and the salary of an average worker each year in Canada. This issue is the concern of many workers as it creates major inequality in the workforce and steps need to be taken to minimize this gap. In 2018, Canada’s top CEOs received salaries 227 times more than that of the average Canadian worker (Weikle 2020). Over a ten-year period from 2008-2018, the average Canadian worker saw a salary increase of 24 per cent where Canada’s top 100 CEOs saw a salary increase of 61 per cent (Weikle 2020). This has become a major concern of many Canadian’s over the years. Yes, CEOs receive a higher salary for their responsibilities, reputation, work efficiency, connections, and skills, but should their pay increases be at the incline that has been seen in the past? It has been concluded that the high salary increases aren’t what is keeping CEOs from looking for other job opportunities so why are they rising at such high rates? Continue reading to find out the different problems with this salary gap and ways to help move closer to pay equality.
To begin, the policy problem is the gap that has been created through the rapid salary increase of CEOs and the stilled increase in average worker’s salaries. The desired outcome of this problem is to minimise this gap through increased salaries for the lower income brackets while slowing down the increase in pay for CEOs. This problem can be viewed from a number of different positions including labour, management, and government. From the perspective of a labourer, the salary gap is simply unfair and needs to be reduced. They could choose to approach the problem by finding companies that are willing to pay more or increasing their education and skills to demand a pay increase. The management team could view the problem in terms of expenses where they are constantly looking for ways to reduce expenses, therefore, they would be in support for lower salaries. They could choose to approach this problem by offering as little pay increases as possible or cutting back on benefits as an effort to lower expenses. The government could support the increase in salaries to generate more taxes and could approach this issue by proposing higher income with higher taxes.
Options for different policies could include lower pay for CEOs or lower pay increases which could be reallocated to offer more benefits for the lower or average workers. Additionally, the lower pay for CEOs could also be reallocated to compensate the lower paid workers with a salary that compliments their skill set, given that increases in salary should be based on performance within the position, job expectations, loyalty to the company, and overall work efficiency.
After concluding that a large portion of a CEOs compensation is allocated in stock options, one way to reduce the salary gap could include imposing a higher tax on the earnings of CEOs or a higher tax on their overall salary. In addition, allowing access to stock options for average workers could be beneficial to those interested.
The issue discussed reinforces the inequalities of salary rates between average Canadian workers and CEOs and presents opportunity for improvement in Canada.
Thanks for reading!
– Julia
Link: https://www.cbc.ca/news/business/canada-top-100-ceo-salary-1.5413124
Julia Papaevangelou's Blog 2019 
Hi Julia,
This is an interesting look at pay inequity between CEOs and regular workers, which appears to be growing dramatically mostly because of the way CEO compensation has skyrocketed. I thought it was especially interesting that stock options are such a part of the compensation issue — both in terms of being a part of the compensation package and in reinforcing the pay inequity. It seems that stock options are not an option to most workers, and that taxing those/taxing those at a high rate might be a way to redistribute that so that there is more tax money available to fund programs that benefit a wider segment of the population. It is hard to see current trends in CEO compensation as sustainable otherwise, especially given that there have been some high-profile CEO departures like Dennis Muilenburg, the former CEO of Boeing who resigned after the two 737 Max crashes but prior to his resignation, there was another story about how he was not going to take his bonus for 2019 which honestly seems like the least you can do given that hundreds of people died. Even if he wasn’t directly responsible for the crashes, it still seems to me that arguments for sky-high CEO compensation rely at least in part on the stress and responsibility of the role, so you would expect decisive behaviour from them in situations like that.
Anyway, thanks for your interesting post!
Reference for the Boeing story: https://www.bbc.com/news/business-50304343
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Hi Julia,
I agree, the current salary gap is horrifying and our distribution of wealth globally is out of control. Most of the world either lives in poverty or are just one significant health issue away from missing work and falling below the poverty line. Labourer salaries rarely increase while rich CEOs gain incomprehensible wealth on the backs of labourers. Our current pyramid model of corporate hierarchies benefits few at the expense of many. For example, the Wal-Mart CEO, Presidents, Vice-Presidents and store managers can live luxuriously, while hundreds of thousands of department managers and frontline staff essentially work to live. Corporations like this scarcely offer profit-sharing incentives because people need jobs, and without post-secondary education, it is hard to find a position that pays more than minimum wage and is not physically exhausting.
Unfortunately, raising wages and taxes simultaneously scares away corporations and runs small businesses out of business. Like you said, corporations are always looking to cut costs and find efficiencies, so nations avoid increasing the cost of corporate operations. Jeff Bezos, the richest person in the world, is the perfect example of the corporate mindset: horde wealth and exploit labourers. Bezos donated a mere $1 million AUD to Australian fire relief efforts. Australia is quite literally on fire and relies on volunteer firefighters to remedy their situation. Bezos has more power in terms of wealth to help than any other living being, and he chose to donate the sum of his earnings…in 5 minutes (Holmes, 2020). I don’t have enough words to get into the United States Amazon labour force crisis, but Bezos’ company (Amazon) is the highest-grossing internationally and was recently under fire for neglecting to provide their underpaid employees with restroom breaks (Liao, 2018).
To end on a positive note, I encourage you to read this article on Nintendo’s CEO – he cut his salary in half after the Wii U bombed to avoid punishing labourers through layoffs for the mistakes of management: https://www.businessinsider.com.au/nintendos-ceo-will-halve-his-pay-after-profits-drop-2014-1?r=US&IR=T
Thanks for your post, I enjoyed reading & reflecting on your thoughts!
References:
Holmes, A. (2018). Jeff Bezos is getting slammed for his donation of $690,000 to the Australian wildfire recovery, which is less than he made every 5 minutes in 2018. Business Insider. Retrieved January 31, 2020, from https://www.businessinsider.com/amazons-australia-fires-donation-backlash-jeff-bezos-2020-1
Liao, S. (2018, April 16). Amazon warehouse workers skip bathroom breaks to keep their jobs, says report. The Verge. https://www.theverge.com/2018/4/16/17243026/amazon-warehouse-jobs-worker-conditions-bathroom-breaks
Presse, A. F. (2014, January 30). Wii U bombed, so Nintendo CEO cuts his own pay. Business Insider Australia. https://www.businessinsider.com.au/nintendos-ceo-will-halve-his-pay-after-profits-drop-2014-1
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Hi Julia!
I love the topic you have chosen, as I find that it is something that many people think about, but has not been discussed as extensively as needed. It is upsetting to realize how much money CEOs make and how many employees are close to the poverty line, or even living in poverty due to their wages. Although CEOs do carry many responsibilities, the wealth that they have comes from much of the work from employees and labourers. This is important to think about, as the company may not be able to run without the support and employment of many lower-level employees. I believe that many corporations are sucked into earning a lot of money, and forget about how important the lower-level employees are and how beneficial they are to ensuring the company runs smoothly. An increase in their wages, even by a couple dollars could have a dramatic effect on the productivity and the attitudes of employees. What are your thoughts on this?
I agree with your point about how lower salaries to CEOs could be reallocated to different programs within the company to ensure employers success, productivity, and general satisfaction. The stock option that you mentioned would also be very beneficial, as it provides another avenue for lower-level workers to gain more money and to invest in the company that they work hard for.
Thanks for sharing this interesting idea!
Laura
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