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Monday, November 7, 2022

For Each $1 Raise You Got, Executives Got $500

The Executive Class Gobbles Up Much More of Total Pay


The Magnet, from Puck, 1911. (Udo J. Keppler / Library of Congress)

Here’s the real news on your 2021 pay raise, thanks to exclusive reporting by DCReport.

The Executive Class received $500 for every dollar in raises you earned last year, my annual analysis of the latest official pay data shows.

If you worked full-time and made less than $250,000, your average pay increase last year was $1,600.

For the Executive Class paid $1 million or more, the average pay increase was $840,500—500 times as much.

Pay for the Executive Class, which had been slowly taking a growing share of all American wages, salaries, and bonuses, has taken off like a rocket since the Trump/Radical Republican tax law took effect in 2018.

Average pay increases for the 97.3% of full-time workers making under $250,000 fell far short of the 4.7% U.S inflation rate, rising just 2.7%. That means the vast majority of full-time workers lost almost $1,200 of buying power.

Meanwhile, Executive Class pay rose 40.7% in 2021, nearly nine times more than the inflation rate. And it wasn’t an isolated response to pandemic economics.

The number of Executive Class workers exploded in 2021, up from 184,631 in 2020. That’s a 29% growth in just one year for Executive Class employees compared to an overall growth rate in paid workers at any wage of 0.3%. In other words, the number of people in the Executive Class is growing more than 100 times faster than the overall pool of employees.

My analysis shows the Executive Class slowly pulling ahead over time. Then the Trump/Radical Republican tax “cuts” were enacted in December 2017.

I use scare quotes because there was no tax cut, only a deferral of unpaid taxes into the future. It was a classic Trumpian trick that only a few of the best journalists caught and reported as such.

Phony Tax Cuts

The seeming tax “cuts” were financed with borrowed money. That means interest is adding to the increased debt that financed the tax “cuts.” Republicans are citing that increased debt as a reason to demand cuts in spending, including phasing out Social Security and Medicare. That’s also a trick to expand the upward redistribution of income and wealth.

The Trump/Radical Republican scheme that slashed taxes paid by corporations is central to the rising pay of the  Executive Class.

Corporate income tax revenue fell by one-third in 2018 when the law took effect. Trump and his allies promised the tax cut would result in new investment to create new jobs. Some of that happened, but much more significant was the use of tax “savings” for stock buybacks and huge paydays for the Executive Class.

The result is that pay for the Executive Class, which had been slowly taking a growing share of all American wages, salaries, and bonuses have taken off like a rocket, increasing much faster since the tax changes took effect than in the previous 16 years.

In 1991 the Executive Class—those making $1 million or more in inflation-adjusted dollars—got just 2% of all pay. By 2017, the last year before the Trump/Radical Republican tax law took effect, that share of all pay had grown to almost 4.7%.

Last year, just four years after the tax law changes, the Executive Class raked in 6.7% of all pay.

Growth Rate Triples

The awful truth is that the rate of growth in Executive Class pay tripled once the Trump/Radical Republican tax law took effect. It took 16 years to increase that group’s share of all pay by 2.7 percentage points but then just four years to increase by slightly more than 2 percentage points.

These numbers come from my analysis of the Social Security Wage Statistics report. Every year Social Security adds up every wage, salary, and bonus to the penny. This is the same data you get in your annual W-2 wage statement from your employer. And it is the same data that the Internal Revenue Service uses to verify what you put on your income tax return. There simply is no better source of pay data.

My analysis this year focuses on full-time workers, those making between $15,000 and $250,000. I then compared these nearly 119 million workers to the Executive Class, those paid $1 million or more.

Social Security breaks pay down into income categories or groups. I’ve been analyzing this report annually for more than a quarter century, documenting the flat to falling incomes of most workers while the Executive Class rolls in ever more dough.

This long-term trend of most people getting nowhere while those at the top grow much richer each year explains much of the venomous discontent infecting American politics. 

The vast majority of Americans have no idea of this data or how government policies encourage more for the already rich because our major news organizations have, so far, largely ignored it. I retain hope that will change.

All that most American workers know is that they see on television more and more people who own many mansions and personal jumbo jets while they strain to make ends meet.

Threat to Democracy

Donald Trump and others who would end our democracy and impose a dictatorship exploit this understandable rage over economics without offering anything except to make things worse. That $500-to-$1 pay increase ratio will soar if we give up our democracy, as many tens of millions of Americans apparently are willing to do by supporting candidates who promise to stay in office regardless of what voters decide and, in some cases, to make Trump president for life.

Unless you read my reporting, you probably don’t know about how the Executive Class is sucking up so much of the increased pay in America. Even though the data is readily available, no one else in American journalism (or academia) takes the time to analyze this valuable source of data. That’s surprising because this is the most accurate and useful pay data in America.

Skeptical readers are invited to download the annual wage statistics, which go back to 1990, and test the accuracy of my reporting. Go to this web page and then adjust the year in the URL.

To be clear, what journalists from legitimate news organizations tell you is highly accurate. But it is also mostly based on what sources tell reporters, verbally or in press releases, and what critics say in response. I call that the “official version of events.” Solid, but superficial and limited in scope.

Many rich troves of highly revealing official government data never make the news because few journalists know where to find such data. I’m close to alone in sifting through such data and making it meaningful apart from TRAC, the clumsily named but highly valuable Transactional Records Access Clearinghouse at Syracuse University. TRAC is run by David Burnham, a former top New York Times reporter, and Susan Long, a business professor.

Average Is Misleading

To the extent that the annual Social Security report makes the news, all you are likely to hear about is the average wage.

In 2021 the average annual wage for all employees, from those who made just $1 to those making more than $100 million, was $58,129.99, up from $53,383.18 in 2020.

On the surface, that looks like a healthy increase of nearly 9%, roughly double the inflation rate.

But without analyzing the distribution of pay hikes, the average is misleading because pay at the top has no limit and that’s where the big raises are.

More than two-thirds of all people who earned a paycheck in 2021 made less than the average wage, Social Security noted. This number has been slowly rising for decades, a sign of top-end wage growth and stagnation below.

My analysis also shows that nearly all of the 2021 pay increases went to people up the income ladder, the one in eight employees making $100,000 or more.

Median Wage

One indicator of the way average pay distorts is shown by the median wage—half make more, half less. Economists consider the median a good indicator of typical pay.

Median pay last year was $37,586, up nearly $3,000 from 2020, when the median was $34,612.

But the median is also misleading because one in four workers made less than $15,000. They were all part-timers. We know that because the federal minimum wage is $7.25. If you worked 40 hours a week for all 52 weeks your gross pay would be $15,080.

Last year the 237,331 Executive Class employees made, on average, almost $2.8 million. Two decades earlier, the same group numbered just 55,823 and earned less than $2 million when measured in 2021 dollars.

Comparing Executive and Median Pay 

In 2021, Executive Class average pay was $2,777,799, up 44% above inflation after two decades. In contrast, the median for all workers rose only about half that, 23% above inflation.

But keep in mind that most of the new Executive Class people were paid near the threshold of $1 million annual pay.  That tends to hold down the average at the top.

To understand the explosive growth of Executive Class pay—that $500 to $1 pay increase ratio—we have to look at the highest paid of the Executive Class, including the hundreds of people whose average paycheck in 2021 was $151 million.

That will be explored in Part 2 of our series, while Part 3 will focus on the part-timers who make less than $15,000 annually.

David Cay Johnston is the Editor-in-Chief of DCReport. He is an investigative journalist and author, a specialist in economics and tax issues, and winner of the 2001 Pulitzer Prize for Beat Reporting.