Four years into the business cycle, the fortunes of CEOs and middle-class families are pulling further apart. While inflation adjusted earnings in 2004 were on average below those in 2003 and 2002, CEO pay soared. For all of 2004, the typical CEO received $9.3 million. For those CEOs for whom data were also available for 2003, this meant an increase of 33 percent from 2003 to 2004. This meant that in 2004, CEO pay climbed to 240 times the average pay of a production non-supervisory worker, the vast majority of America’s private sector work force, up from 185 times in 2003 (figure 1).
CEO compensation varied by industry. While the typical CEO was paid millions of dollars in 2004, compensation for the typical CEO ranged from $3.8 million in consumer services to $17 million for CEOs in oil and gas (figure 2). Similarly, gains in typical CEO pay varied. CEO compensation in oil and gas led the way with a typical gain of 109 percent, whereas CEOs in the telecommunications industry saw their compensation actually decline slightly (figure 2). Yet CEOs in the telecommunications industry still remained the second most highly compensated CEOs, after those in oil and gas.
The divergent trends between the compensation for workers and the compensation for CEOs reflect the fact that much of this recovery has been an “upside-down” economy. While workers typically see strong gains in a recovery and tend to reap the majority of economic gains during that period, this recovery has been marked by slow income growth for workers and record profit gains for corporations. CEOs at increasingly profitable companies have therefore seen their compensation greatly exceeding the fortunes of America’s workers, who continue to struggle to make ends meet.
Christian E. Weller is a senior economist at the Center for American Progress and John Alexander Burton is a research associate at the Center for American Progress.