Labor Day, first celebrated in September 1882, is usually feted with family barbecues. As we acknowledge the end of summer this year, the American worker sadly finds himself “celebrating” a lost decade. Job growth among the private sector has been declining the past ten years. The public sector employee and the American corporate executive have left the private US worker hungry for equality.
While the private sector employee is sharing hotdogs, the government worker is eating steak and the corporation executive is being served lobster and champagne.
In 2008, the average wage for 1.9 million federal civilian workers was $79,197. The nation’s 108 million private sector workers averaged $49,935. After adding benefits the difference was even more dramatic. We will not even bother to discuss the health and retirement benefits our congressional friends in Washington receive. I’m sure they are drinking champagne today on a private airplane destined for a taxpayer funded, fact finding junket. No doubt funded by lobbyists from AIG, Citicorp or Goldman Sachs.
“Excessive executive compensation has taken center stage since the government bailout of banks that began in September 2008. Americans have expressed outrage as CEOs and other executives responsible for the financial crisis have pocketed millions of dollars from bonuses and golden parachutes. CEO perks alone grew in 2008 to an average of $336,248—or nine times the median salary of a full-time worker. Meanwhile, the economy tanked for working people while many companies were bailed out with more than $700 billion in taxpayer money, as well as low-interest loans and guarantees” (Executive PayWatch 2009, AFL-CIO).
In 1965, U.S. CEOs in major companies earned 24 times more than an average worker; this ratio grew to 35 in 1978 (35 is the ratio the average Euro exec today makes) and to 71 in 1989. The ratio spurted in the 1990’s. Since then, CEO pay has exploded. By 2005 the average CEO was paid $10,982,000 a year, or 262 times that of an average worker ($41,861). The ratio remains close to 262-1 today. (Economic Policy Institute).
As we discussed in this column last month, Citigroup Inc., Merrill Lynch & Co. and seven other U.S. banks lost a net $81.5 billion in 2008. Yet incredibly, they paid themselves $32.6 billion in bonuses after receiving $175 billion in taxpayer funds (report by New York Attorney General Andrew Cuomo).
Chief executive officers at 20 banks who got U.S. aid received compensation 37 percent higher than the average for leaders at S&P 500 companies. TARP recipients including Bank of America and Wells Fargo paid CEOs an average of $13.8 million last year, topping the $10.1 million for S&P 500 leaders (report released by the Institute of Policy Studies). Average CEO pay was 430 times larger than for typical workers.
Nine of the financially crippled firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008.
Bonus money for incompetent bankers at 20 times the salary for the US worker? Lobster and champagne for those that fail paid for by the US worker who shares hotdogs.
Let us not forget the disparate pay of the US soldier. We have lost 4,339 American soldiers in Iraq to date. August was a most deadly month in Afghanistan. 45 young soldiers perished, bringing the total deaths in Afghanistan to 738.
The average US soldier pay is $44,000.
1. The average CEO bonus is 8 times that amount.
2. The taxpayer aided, average Goldman Sachs bonus is 21 times more.
3. The first year pay for a Wall Street lawyer or MBA investment banker is 3-4 times that amount.
4. The pay grade of a fleet admiral, responsible for a nuclear powered $4.5 billion aircraft carrier carrying 6500 sailors and 50 aircraft is around $130,000.
In a nation of misallocated salaries, which American above is more worthy of a bonus from the United States government?
Friday, as the official US unemployment rate reached 9.7% with 15 million unemployed, the government projects U6 unemployment (including marginally attached workers and those working part-time for economic reasons) to be 16.8% and 25 million unemployed.
To add insult to injury, The Labor Department said last Tuesday that the American worker, at an annual rate, was 6.4 percent more productive while his pay fell by 5.8 percent. His government counterpart saw a salary and benefits increase. His CEO was rewarded with a pay package 262 times his salary.
“Money should never be separated from values. Detached from values it may indeed be the root of all evil. Linked effectively to social purpose it can be the root of opportunity.” R. Kanter
Fred Crossman, J.D., C.P.A.
September 7, 2009
Mr. Crossman is a principal of the Thunderbird-Tahoe Fund, a long/short hedge fund in formation.
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