Recently, the word “greedflation” has caught on to explain the out-of-control prices U.S. consumers are facing. It argues the rising cost of gas and groceries isn’t owing entirely to trade disruptions or expense hikes along the supply chain—corporate greed is as much to blame, and companies are using the veneer of inflation to justify upping prices, then awarding much of the extra profit to executives.
A new report released today by the AFL-CIO gives that argument some new ammo. Its annual Executive Paywatch Report, a comprehensive database tracking CEO-to-worker pay ratios for over 20 years, reveals that S&P 500 CEOs averaged $18.3 million in compensation for 2021—324 times the median worker’s pay, and higher than both 2020’s pay ratio (299-to-1) and 2019’s ratio (264-to-1).
During 2021, a year crippled by the pandemic plus inflation, CEOs were fast to pin blame for price increases on the pandemic, inflation, and increases in worker wages. The AFL-CIO report, however, shows that workers’ real wages fell 2.4% in 2021, after adjusting for inflation.
That means company profits are up, CEO compensation is also up, but real employee wages are down. The AFL-CIO, which is America’s largest union, argues there’s only one interpretation. “CEOs, not working people, are causing inflation,” it says, adding: “Runaway CEO pay is a symptom of greedflation.”
“Instead of investing in their workforces by raising wages and keeping the prices of their goods and services in check, their solution is to reap record profits from rising prices and cause a recession that will put working people out of our jobs,” said Fred Redmond, AFL-CIO’s secretary-treasurer.
To get a broad look, the group’s report focused on both S&P 500 and Russell 3000 companies. Publicly traded companies must disclose the pay gap between their top-paid executive and the median employee. Average total compensation for S&P 500 CEOs saw a $2.8 million (or 18.2%) increase from 2020. Inflation for 2021 was 7.1%, and workers’ wages rose just 4.7% for the year.
Companies atop the report’s list of biggest pay gaps include the ones typically criticized for poor employee compensation. McDonald’s CEO Chris Kempczinski earned 2,251 times more than the average worker, Starbucks’s ex-CEO, Kevin Johnson, took home 1,579 times more, and Arnold Donald—the Carnival Corporation CEO who just resigned following pushback over his high compensation—made 1,740 times more.
But the report also shows this wide gap isn’t just a food service or hospitality industry problem: At Expedia—a tech company paying $102,270 on average—the pay gap was 2,897-to-1. It was 1,711 at Intel, and 1,447 at Apple.
The pay ratio list’s two top offenders provide some helpful context for processing how out of control the pay gap has gotten. The company with hands down the biggest pay gap is Nu Skin Enterprises. Its top executive out-earns the average worker 22,091-to-1. But that’s because Nu Skin sells wellness products via a multilevel marketing scheme for which it’s had to reach settlements with the Federal Trade Commission, six state attorneys general, and even China. The AFL-CIO’s report says the median pay was $224 last year. Yet the company with the second-worst pay gap is Amazon, where median pay is $32,855, but the pay ratio is 6,474-to-1, or nearly a third as bad as Nu Skin’s.
The AFL-CIO notes none of this is a new trend. Average S&P 500 executive pay has climbed by about $500,000 a year for 10 straight years, while average worker wages have increased by just $1,303, topping out at $58,260 in 2021. The group argues this pay gap offers clues into businesses’ focuses: “A higher pay ratio could be a sign that companies suffer from a winner-take-all philosophy,” but “a lower pay ratio could indicate the companies that are dedicated to creating high-wage jobs and investing in their employees for the company’s long-term health.”