What Would Happen If the Top 10 CEOs Gave up Their Salaries?

October 23rd 2015

Kyle Jaeger

People were pretty upset to learn that CEOs make about 300 times more than the average employee, as the Economic Policy Institute reported this year. They were angry because income inequality is a growing problem in the U.S., and this was proof. So when J.P. Morgan CEO Jamie Dimon argued that decreasing the pay gap between workers and executives wouldn't fix America's economic problems last month, Demos crunched the numbers.

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"If you took all the compensation of all the CEOs of the top 500 companies in America, it wouldn’t make a dent in this problem," Dimon told Meet the Press.

To be sure, it would be nearly impossible to determine how cutting executive pay would affect the U.S. economy as a whole given the lack of available data. The SEC ruled that companies must disclose CEO-to-worker pay ratio this summer, but that requirement has been slow to go into effect. By looking at the most recently reported CEO salaries of 10 major companies, however, Demos was able to show the impact of redistributing their earning to their workers.

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In this way, you can get a sense of how redistribution would affect the lives of average employees, who make between $28,031 and $34,823 per year, according to the U.S. Census Bureau. Still, total redistribution runs counter to the country's capitalist economy, so for this report, Demos capped CEO annual salaries at $1 million.

"If this happened—if these CEOs only made a paltry seven figures a year—their employees would see an $1,419 increase in salary," Demos reported. "That makes this salary bump equivalent to a 4-5 percent raise."

"In other words, redistributing the salaries of ten men instantaneously gives half a million employees an annual raise—and a generous one, at that—in an economy that hasn’t seen a real hourly wage increase in over five years."

There has been a lot of talk about income inequality in the U.S., especially ahead of the 2016 presidential primary. Democratic candidates Sen. Bernie Sanders and Hillary Clinton have been particularly vocal about the issue, calling for the minimum wage to be raised and tax loopholes that benefit the very wealthy to be closed. Even Republican front-runner Donald Trump has called the pay gap between CEOs and average workers "disgusting."

"You see these guys making these enormous amounts of money, and it’s a total and complete joke," Trump said on Face the Nation. "They pay very little tax, and that’s going to end when I come out with my plan in about three weeks, could be sooner than that…We’re going to be reducing taxes for the middle class. But for the hedge fund guys, they’re going to be paying up."

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