Category Archives: Compensation

CEO compensation surged 14% in 2019 to $21.3 million – CEOs now earn 320 times as much as a typical worker

Source: Lawrence Mishel and Jori Kandra, Economic Policy Institute, August 18, 2020

From the introduction:
Chief executive officers (CEOs) of the largest firms in the U.S. earn far more today than they did in the mid-1990s and many times what they earned in the 1960s or late 1970s. They also earn far more than the typical worker, and their pay—which relies heavily on stock-related compensation— has grown much more rapidly than typical worker pay. Importantly, rising CEO pay does not reflect rising value of skills, but rather CEOs’ use of their power to set their own pay. And this growing earning power at the top has been driving the growth of inequality in our country.

Notes On: Spotlighting Potential Coronavirus Wage-and-Hour Woes

Source: Lisa Milam, Labor Law Journal, Vol. 71, Issue No. 2, Summer 2020
(subscription required)

From the abstract:
…Employers are forced to make difficult decisions, often at warp speed, as they operate during the pandemic and resulting economic downturn. But making tough decisions without consulting legal counsel can invite costly litigation, and wage and hour suits—particularly class actions—are among the most expensive for employers.

In a recent Seyfarth Shaw LLP webinar on “Litigation Trends in the Post COVID-19 World,” Lynn A. Kappelman, a partner in the firm’s Boston office, discussed the wage-hour issues that arise as employers look to control payroll costs while maintaining operations, and also as they look ahead to reopening as the crisis abates. Kappelman followed up with Labor and Employment Law Daily about the common wage-hour traps that can befall employers during this unprecedented crisis.

Is Community Service Compensable? DOL Offers An Opinion

Source: Maureen Minehan, Employment Alert, Volume 36, Issue 23, November 12, 2019
(subscription required)

At Salesforce, the provider of customer relationship management solutions, volunteerism is a deeply ingrained core value. From restoring local habitats to helping children in need, Salesforce employees can participate in numerous activities on- and off-the-clock to address myriad needs in their communities. “From the beginning, giving back was the best decision we ever made—it created a culture that attracts and retains the best and the brightest, and allows our employees to be change makers in their own communities,” the company says.

Still, in keeping with the adage that no good deed goes unpunished, questions sometimes arise about the compensability of employees’ volunteer work. If a non-exempt employee volunteers during non-work hours for a company-sanctioned cause or event, are those hours compensable? Can companies offer bonuses or other inducements to encourage employees to volunteer?

CEO compensation has grown 940% since 1978 – Typical worker compensation has risen only 12% during that time

Source: Lawrence Mishel and Julia Wolfe, Economic Policy Institute, August 14, 2019

From the summary:
What this report finds: The increased focus on growing inequality has led to an increased focus on CEO pay. Corporate boards running America’s largest public firms are giving top executives outsize compensation packages. Average pay of CEOs at the top 350 firms in 2018 was $17.2 million—or $14.0 million using a more conservative measure. (Stock options make up a big part of CEO pay packages, and the conservative measure values the options when granted, versus when cashed in, or “realized.”) CEO compensation is very high relative to typical worker compensation (by a ratio of 278-to-1 or 221-to-1). In contrast, the CEO-to-typical-worker compensation ratio (options realized) was 20-to-1 in 1965 and 58-to-1 in 1989. CEOs are even making a lot more—about five times as much—as other earners in the top 0.1%. From 1978 to 2018, CEO compensation grew by 1,007.5% (940.3% under the options-realized measure), far outstripping S&P stock market growth (706.7%) and the wage growth of very high earners (339.2%). In contrast, wages for the typical worker grew by just 11.9%.

Why it matters: Exorbitant CEO pay is a major contributor to rising inequality that we could safely do away with. CEOs are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills. This escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1.0% and top 0.1% incomes, leaving less of the fruits of economic growth for ordinary workers and widening the gap between very high earners and the bottom 90%. The economy would suffer no harm if CEOs were paid less (or taxed more).

How we can solve the problem: We need to enact policy solutions that would both reduce incentives for CEOs to extract economic concessions and limit their ability to do so. Such policies could include reinstating higher marginal income tax rates at the very top; setting corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation; establishing a luxury tax on compensation such that for every dollar in compensation over a set cap, a firm must pay a dollar in taxes; reforming corporate governance to give other stakeholders better tools to exercise countervailing power against CEOs’ pay demands; and allowing greater use of “say on pay,” which allows a firm’s shareholders to vote on top executives’ compensation.

Related:
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Do Targeted Business Subsidies Improve Income and Reduce Poverty? A Synthetic Control Approach

Source: Jacob Bundrick, Weici Yuan, Economic Development Quarterly, OnlineFirst, September 20, 2019
(subscription required)

From the abstract:
Interstate competition for economic development has led many states to adopt targeted economic development incentive programs known as deal-closing funds. Deal-closing funds allow state officials to provide discretionary cash grants to select businesses to attract and retain economic development projects. However, whether these targeted business subsidies increase prosperity in the local economy remains unclear. The authors use evidence from Arkansas’s Quick Action Closing Fund to analyze how effective deal-closing funds are at increasing incomes and decreasing poverty. Specifically, the causal effects of the Quick Action Closing Fund on Arkansas’s county-level per capita personal income and poverty rates are estimated using a synthetic control approach. The results largely suggest that the business subsidy program fails to increase incomes and lower poverty rates over the long term, at least at the county level. These findings should serve as a caution to policy makers who wish to improve incomes and poverty rates with targeted business subsidies.

Three Big Ideas for a Future of Less Work and a Three-Dimensional Alternative

Source: Cynthia Estlund, Law and Contemporary Problems, Vol. 82 no. 3, 2019

….At the same time, each of those three big ideas holds within it an essential component of a sound three dimensional response to the uncertain but real prospect of job losses. In lieu of UBI [universal basic income], we should expand universal social benefits—starting with health care and higher education—and income support for the working and non-working poor. In lieu of a federal job guarantee, we should ramp up public investments in infrastructure, social and community services, and early education, all of which would address unmet societal needs while creating decent jobs. And in lieu of (or at least before) reducing weekly hours of work across the board, we should expand access to paid leaves, holidays, and vacations, as well as voluntary part-time work and retirement security; we could thereby spread work and meet varied individual needs and preferences through days, weeks, months, and years of time off.

In combination, these three interventions—expanded universal social benefits and income support, public investments in physical and social infrastructure and the job creation those will entail, and wider access to paid leaves and respites from work—would advance core objectives of each of the three big ideas while muting their disadvantages. Together they would both cushion and offset automation-related job losses, while spreading the work that remains and maintaining or boosting incomes. This trio of policies could and should also be funded in a way that helps to redistribute income from the top to the bottom of an egregiously and increasingly lopsided income distribution.

…..In what follows, I will fill in the outlines of this argument. Part II will briefly set out some normative priors about the multiple ends we should be pursuing as we face a future of less work. A long Part III will take up each of the Three Big Ideas, briefly tracing their genealogy and identifying some strengths and weaknesses of each. Part IV will return to the core aspirations of the Three Big Ideas, and sketch a combination of the three – a three-dimensional strategy – that can preserve much of the good while avoiding much that is problematic in the more single-minded Three Big Ideas. ….

U.S. Nursing Assistants Employed in Nursing Homes: Key Facts (2019)

Source: PHI, September 3, 2019

From the abstract:
This research brief provides the latest annual snapshot of U.S. nursing assistants employed in nursing homes, including key demographics and a variety of wage and employment trends. This year’s research found that 581,000 nursing assistants support older people and people with disabilities in nursing homes. Nursing assistants are injured more than three times more frequently than the typical American worker, and earn a median hourly wage of $13.38 and a median annual income of $22,200.

Key Takeaways:
– The number of nursing assistants employed in nursing homes in the U.S. declined from just over 599,000 in 2008 to 581,000 in 2018.
– Nursing assistants earn a median hourly wage of $13.38 and a median annual income of $22,200.
– Nursing homes will need to fill nearly 680,000 nursing assistant job openings between 2016 and 2026.

U.S. Home Care Workers: Key Facts (2019)

Source: PHI, September 3, 2019

From the abstract:
This research brief provides the latest annual snapshot of the U.S. home care workforce, including key demographics and a variety of wage and employment trends. This year’s research found that nearly 2.3 million home care workers earn a median hourly wage of $11.52 and about $16,200 annually. One in six home care workers lives below the federal poverty line and more than half rely on some form of public assistance.

Key Takeaways:
– Nearly 2.3 million home care workers provide personal assistance and health care support to older adults and people with disabilities.

– From 2016 to 2026, the home care sector will need to fill 4.2 million home care worker job openings.

– With a median hourly wage of $11.52 and inconsistent work hours, home care workers typically earn $16,200 annually.

How Local Economic Conditions Affect School Finances, Teacher Quality, and Student Achievement: Evidence from the Texas Shale Boom

Source: Joseph Marchand, Jeremy G. Weber, Journal of Policy Analysis and Management, Early View, August 29, 2019
(subscription required)

From the abstract:
Whether improved local economic conditions lead to better student outcomes is theoretically ambiguous and will depend on how schools use additional revenues and how students and teachers respond to rising private sector wages. The Texas boom in shale oil and gas drilling, with its large and localized effects on wages and the tax base, provides a unique opportunity to address this question that spans the areas of education, labor markets, and public finance. An empirical approach using variation in shale geology across school districts shows that the boom reduced test scores and student attendance, despite tripling the local tax base and creating a revenue windfall. Schools spent additional revenue on capital projects and debt service, but not on teachers. As the gap between teacher wages and private sector wages grew, so did teacher turnover and the percentage of inexperienced teachers, which helps explain the decline in student achievement. Changes in student composition did not account for the achievement decline but instead helped to moderate it. The findings illustrate the potential value of using revenue growth to retain teachers in times of rising private sector wages.