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4 ways you never thought about your company's wage gap
In one corner, a growing sea of low-earners organize occupy movements and point out that business research shows the top 1 percent of Americans received more than half of all income growth from 1979 to 2007, whereas income grew by just 20 percent for the other 99 percent of taxpayers.
In the other corner, many CEOs, millionaires and 1 percenters alike claim that they've earned every penny of their fortunes. Less than one-third of the Forbes 400 list of wealthiest Americans came from wealthy families themselves, according to the Stanford Graduate School of Business.
The increasing wage gap in America is a tremendous point of contention, argued ad nauseam with a colorful plethora of gray area that serves to convolute the issue. Step away from the greater dilemma of wage distribution and minimum wage debate for a moment and consider just your business.
What's the wage gap in your company? What is the lowest amount a full-time employee earns working and how does this stack up against others and the CEO? Whatever your thoughts about those numbers are, consider this: Fair pay is a matter of perspective, and there are dozens of perspectives that can influence you or your employees' feelings and work ethic. Here are four.
"Price used to make around $1 million. He'll soon be making just $70,000."
1. An emotional perspective: Dan Price raised company minimum wage for the sake of happiness
A Seattle-based credit-card payment processing firm called Gravity Payments grabbed headlines when its CEO, Dan Price, announced he would be raising the minimum wage for the 120-person staff to $70,000, according to The New York Times. The former average salary was $48,000.
Price revealed that he would be supplying the hefty sums needed to effectively give over 58 percent of his staff raises by both dipping into 75 to 80 percent of his company's anticipated profits and slashing his own salary. Price used to make around $1 million. He'll soon be making just $70,000 himself - dropping the wage gap between minimum wage employees and the CEO to zero.
Why is Price doing it? Because an article he read revealed that extra money makes a huge difference to earners that make less than $70,000. For those that make above $75,000, extra money doesn't bring much more happiness or relief. He raised salaries to the most conducive levels for employee happiness.
2. From a global perspective: U.S. trumps all other countries in CEO pay ratio
Believe it or not, the 1 percent issue and staggering wage distribution isn't the same issue in countries across the globe. Yes, the divide is there, but not nearly to the extent it is in America. According to the Houston Chronicle, the ratio of CEO pay to the median salary of an employee is the highest in America compared to every other country on Earth. Compared to the business trends of other countries, the margin in the U.S. may come as a surprise.
According to the source, CEOs in:
- The U.K. make 22 times that of a median salary worker.
- France make 15 times that of median salary workers.
- Germany make 12 times that of median salary workers.
In the U.S., CEOs make between 400 and 500 times the amount of their median salary workers. Think Progress noted that the average Fortune 500 company CEO is now paid around 380 times the amount an average worker takes home.
3. A legal perspective: Lawmakers fight to shed light on company wage gaps
Even if the median salary worker earns the federal minimum wage of $7.25, that would still mean a CEO is taking home over $3,000 per hour - or over $7.5 million annually. How is it those enormous gaps don't breed animosity amongst employees? Most don't know the extent of it in their respective companies, but that may change by law.
According to the NY Times, CEO pay ratio was meant to be disclosed annually as part of the Dodd-Frank law approved by Congress in 2010. The Securities and Exchange Commission also proposed a specific pay-ratio rule in 2013.
However, some businesses have fought against the move, saying that it would be too costly to collect the data for employees overseas, stock option grants skew the data and that compensation often depends on company bonuses, which are dependent on performance.
4. An ethical perspective: Do CEOs deserve higher pay?
There certainly may be stock in the last point made by some companies. Who's to say that a CEO should not be compensated if the success of the company can be directly correlated to his or her personal efforts and guidance over the course of the year? This, if anything, should drive companies to search for better leaders and create an incentive for breeding good business.
Unfortunately, not every bonus can be attributed to an executive's savvy performance. In fact, Think Progress reported that some 40 percent of the best paid CEOs in the past two decades were either fired, involved in fraud, or oversaw a company bailout. Collecting a bonus isn't always the ethical decision, especially when salaries are being cut and departments downsized, yet it seems to happen frequently.
For each company, pay should be carefully evaluated. Some highly paid CEOs deserve what they take home. Others may not. The important takeaway is that you consider the facts and base wage carefully and with the most positive business outcomes in mind.
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