As Bad as You Think Inequality Is, It's Worse!
Good read, illustrating how our perceptions about income-inequality tend to differ starkly from its reality,
and are more akin to what it was in 1970 than it is today.
As Bad as You Think Inequality Is, It's Worse!
How much do you think the CEO of a large corporation makes in a year, on average?
By Les Leopold * AlterNet * October 19, 2015
The following is an excerpt from Runaway Inequality: An Activist's Guide to Economic Justice, by Les Leopold (Chelsea Green, 2015).
Please take a moment to write down the answers to two basic questions:
How much do you think the CEO of a large corporation makes in a year, on average?
How much do you think an entry-level factory worker earns in a year, on average?
Your answers allow for the construction of an important statistic about inequality – the wage-gap ratio.
For example, let's say your answer is that the typical CEO makes about $500,000 per year, while the factory worker earns about $25,000 per year. That gives us a wage-gap ratio of 20 to 1 – that is, for every one dollar earned by the worker, the CEO earns $20 (500,000/25,000 = 20/1).
If you said $1 million for the CEO and $25,000 for the factory worker, then the ratio jumps to 40 to 1.
What ratio did you come up with?
How Americans view the wage gap
These same two questions were asked of more than 50,000 people around the world, of whom 1,581 were Americans of all stripes. (The data comes from the International Social Survey Programme: Social Inequality IV-ISSP 2009 on the website Gesis.)
It turns out that the median American response – that is, the response that is exactly in the middle of survey results from Americans – estimated that a CEO of a large company earned about $900,000 per year and that the average factory worker earned about $25,000. That makes for a wage-gap ratio of 36 to 1.
But how close are these estimates to reality? Not very.
The chart below gives us a pretty good estimate of the growing gap between total compensation for the top 100 CEOs and the pay of a typical worker. (The number for workers’ pay was derived by using the average wages of production or nonsupervisory workers, which includes workers in the service sector as well as other private industry sectors.)
In 1970, for every dollar earned by the average worker, the top 100 CEOs earned on average $45. By 2013 the ratio had jumped to $829 to $1, which is 20 times greater that what the typical American in the survey guessed.
More amazing still is that on average Americans think CEOs of large companies receive about $900,000 per year in compensation, when in reality they receive nearly $30,000,000.
It's as if our perception of the income gap was frozen in 1970. We just have not caught up with the realities of runaway inequality.
http://www.alternet.org/economy/bad-you-think-inequality-its-worse
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