Do CEOs Work 351 Times Harder Than You?
The Pitch: Economic Update for August 12, 2021
Friends,
This newsletter originally began a year and a half ago as a way to track the true economic impact of the pandemic in real time. It’s only in the past few months of vaccine-inspired optimism that we’ve begun to broaden our scope to encompass the economic recovery and political battles over economic issues that affect ordinary Americans. And while economic indicators are still largely strong, as we’ll see in this issue, the sad truth is that coronavirus cases in the United States are now higher than we’ve seen since the dark days of last winter.
Because the majority of hospitalizations and deaths are willfully unvaccinated people, and because the American people are understandably weary after a year and a half of lockdowns, I don’t expect to see a wholesale shutting down of the economy—even if those infection numbers continue to rise. But we can expect to see economic growth contract in certain parts of the country where anti-vaccination sentiments are strong, and those regional depressions will likely have an adverse effect on the nation’s economic recovery.
But an economy is nothing without people, and few things are more tragic than an entirely avoidable loss of life. So at the risk of sounding like a broken record: please get vaccinated if you can, and please continue to talk to the people in your life who are skeptical about vaccinations. I found that Derek Hawkins’s piece about talking with unvaccinated friends and family from the Washington Post last month offered some great advice (which also largely applies to difficult political conversations.) At this time last year, we all felt helpless in the uncertainty of the pandemic. Now, we have a proven method for seriously reducing infections, and we can work toward that goal through personal and political actions. I don’t know about you, but when I have to choose between helplessness and hard work, I’ll take the latter every time.
The Latest Economic News and Updates
I wanted to begin this newsletter by thanking all the readers who responded to last issue’s call for what the next great progressive political cause should be. A number of people wrote in with the issues they felt strongest about. Rick called for an end to dark money in politics, Dennis believes that increasing union membership is the most important economic issue of our time, and Dea made a strong case for gender pay equity in the workplace. I’ll be focusing more on each of those issues in the next few months, and I hope you’ll continue to reply to these emails with policies or problems you think deserve greater attention.
Here’s some good news: Heather Long reports that for the first time, average pay for American grocery store and restaurant workers has climbed above $15 an hour. Long also writes that “Overall, 80% of US workers now earn above $15, up from 60% in 2014. Many job seekers refuse to consider jobs that pay less.” This is an important victory, but it’s not the conclusive victory that American workers need—fully one in five workers make less than $15 per hour, with hundreds of thousands still earning the federal minimum wage of $7.25. It’s a relief that employers have finally responded to labor market pressures by increasing wages, but there will always be exploitative workplaces that do the absolute minimum required by law. We can’t afford to leave a fifth of the workforce behind, because a truly healthy economy requires everyone to be included. That consumer spending is what truly drives job growth, small business creation, and community investments. So there’s a lot of work yet to be done.
Eric Levitz at the Daily Intelligencer published a great interview with economist J.W. Mason about why the so-called “inflation debate” going on in the media right now is hugely misleading. Pundits and trickle-downers have been trying to blame recent inflation on increased worker wages, but that’s a misrepresentation of what’s causing certain prices to rise: “Inflation, right at this moment, is exactly two things,” Mason told Levitz. “We’re seeing a big increase in the price of fossil fuels, gasoline, obviously, but also heating oil and so on. That’s one. And two, we’re seeing an increase in the price of automobiles, which is driven, I think, by some degree of supply chain issues plus pent-up demand. And that’s it.”
And inflation seems to be slowing down. Jared Bernstein, a member of the White House Council of Economic Advisers, tweeted that inflation climbed slightly, “up 0.5% in July,” but “down sharply from June.” Inflation is “still elevated” over this time last year in the thick of the pandemic, but Bernstein says the latest inflation “report shows moderating pressures in July, consistent with our expectations.” Consumer prices increased by more than 5 percent year-over-year in July—remember, last year at this time the market was still hugely repressed by lockdowns, which accounts for some of that growth—but The Economist reports that those numbers are not “menacing.” This is not to say that higher prices are a good thing at a time when post-pandemic unemployment is still unnaturally high, but inflationary indicators are still pointing in the right direction for now, as many economists predicted.
This week, the Economic Policy Institute issued an eye-opening report about CEO pay in America. Last year, during the pandemic, “CEOs were paid 351 times as much as a typical worker in 2020.” This, at a time when millions of Americans were unceremoniously fired and cut off from employer health care plans, is more than a little tone deaf. And that pay gap didn’t come out of nowhere last year: EPI notes that “From 1978 to 2020, CEO pay based on realized compensation grew by 1,322%,” a number that far surpassed stock growth and just about every other metric that supposedly figure into CEO pay. “In contrast, compensation of the typical worker grew by just 18.0% from 1978 to 2020,” EPI concludes. CEO pay has even lapped the outrageous income gains of the wealthiest .01 percent of the population a few times over:
A new poll from Fighting Chance for Families (PDF) shows that the Biden Administration’s new Child Tax Credit program is incredibly popular with people who have received Child Tax Credit checks. In a time of serious partisan division, 71 percent of Trump supporters who received Child Tax Credit payments support the program—a level of favorability for a Democratic-sponsored program that would have seemed unthinkable at any point from 2016 to 2020. People like to see real, concrete benefits from their government.
For nearly 30 years, Democrats have promoted college education as a ticket to economic prosperity—particularly for Black Americans. Generations of young Black Americans were told that going to a good school and getting a college diploma would help them close the wealth gap with white families. But the ticket to economic freedom that Democrats have been promising for decades has failed to materialize. A new study from the Wall Street Journal finds that “The median net worth of households with Black college graduates in their 30s has plunged over the past three decades to less than one-tenth the net worth of their white counterparts.” Skyrocketing student debt—climbing from $6,000 to nearly $45,000 for young Black college graduates— and shrinking incomes have both contributed to this unacceptable drop in wealth. It’s not simply enough in the fight against income inequality to point people in the direction of prosperity and wish them the best. There must be policies in place to address systemic failures and ensure that our prosperity is shared.
Real-Time Economic Analysis
Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunkworks; and follow us on Twitter and Facebook.
Nick and Goldy take listener questions in a new Ask Me Anything episode of Pitchfork Economics. I continue to be amazed by the high quality of Pitchfork’s listener contributions, which range from incisive questions about the purpose and effects of inflation to musings on why the American tax code is so complicated to concerns about a plan to raise the minimum wage for large employers causing a brain-drain for small businesses. These AMA episodes are a great way to catch up on some of the hottest topics in economics today.
And in his Business Insider column, Paul writes about why the Frito Lay strike in Topeka, Kansas captured the American imagination for a whole month this summer. Did you know that most major American newspapers used to have reporters specifically assigned to cover labor issues? Those same newspapers eliminated their labor beats many years ago as part of a wave of costcutting measures— a reminder that what we choose to prioritize (and, by extension, deprioritize) in our media can have unforeseen repercussions for decades to come.
Closing Thoughts
It’s good news that the Senate this week passed a $1 trillion infrastructure bill with overwhelming, bipartisan support. A broad swath of Americans favor infrastructure investments, so this is a rare case of the Senate actually reflecting the will of the people they’ve been elected to represent.
But bipartisanship and political theater can only get you so far, which is why I’m thrilled to see that Senate Democrats have begun taking steps toward approving a $3 trillion budget reconciliation bill including a number of initiatives that were stripped out of the infrastructure bill while leaders worked to win bipartisan support. The Washington Post reports that this bill, which is advancing along strictly partisan lines, incorporates “plans to expand Medicare, combat climate change...paves the way for universal prekindergarten and new family leave benefits, and it aims to help immigrants obtain legal permanent residency status.” Additionally, “Democrats aspire to finance the array of new initiatives through tax increases targeting wealthy families and profitable corporations, undoing the rate cuts imposed under President Donald Trump.”
To be clear, these policies enjoy broad, bipartisan support among the general public, too. But Senate Republicans are in thrall to the trickle-down pillars of low wages, low taxes on the wealthy and corporations, and rampant deregulation to even consider passing any of them. So while it is undoubtedly good press for Democrats in office that a major infrastructure bill passed with both sides of the aisle in rare agreement, we should also be cheering the fact that Democrats are advancing important legislation that will improve economic outcomes for a vast majority of Americans, whether the politics of the plan are partisan or not.
Be kind. Be brave. Get vaccinated.
Zach