Column: An Economy that Works for Everyone
With Labor Day having just passed, we are afforded an opportunity to reflect on the state of our economy and ask important questions about whether it is truly working for all of our families.
I’m very pleased that we have taken some steps recently to improve the economic quality of life for people across the Commonwealth. Last year, the Legislature passed an increase in the minimum wage to $9 per hour as of January 1 of this year, increasing to $10 per hour on January 1, 2016, and to $11 per hour on January 1, 2017. Also, via ballot question on Election Day last November, Massachusetts voters approved an earned sick leave policy that will give many thousands of workers a critically important benefit to which they previously lacked access. These are important and impactful victories for Massachusetts workers, but there is much more work that needs to be done.
As the economy has grown over the last three-and-a-half decades, very few have benefited from that growth. As the Massachusetts Budget and Policy Center pointed out in its Labor Day 2015: Important Gains, Many Challenges for MA Workers analysis, “Since the late 1970s, wages and incomes for most working families have stagnated. By contrast, for the highest income households, incomes have grown at ten times the rate of income growth for the bottom 90% of the population.” The annual growth rate of average income in Massachusetts between 1979 and 2011, for the top 1% of income earners, was over 4%, but, for the bottom 90% of income earners, the growth rate was only four-tenths of one percent!
We see this economic dynamic play out when it comes to corporate executives’ salaries as compared to the average wages of employees at their respective companies. According to the Economic Policy Institute, in 1965, the CEO-to-worker compensation ratio was 20-to-1; in other words, CEO’s made on average about twenty times what the average employee made. That ratio grew to about 30-to-1 in 1978. Those figures seem positively quaint compared to today’s disparity. According to an AFL-CIO study conducted in 2013, the average CEO made 272 times more than the average worker in Massachusetts corporations that are included in the S&P 500 index.
Last month, the Boston Herald highlighted an extreme case when the newspaper reported that “Framingham’s TJX Cos. could take some heat under a new U.S. Securities and Exchange Commission rule that will require larger public companies to disclose a ratio comparing their CEO’s compensation to the median pay of their workers.” The Herald noted that TJX CEO Carol Meyrowitz total compensation for the 2015 fiscal year – $28.69 million – was 1,159 times the estimated median worker pay at TJX, which was $25,000.
To further encourage greater balance between executive and average employee compensation, I have filed legislation, Senate Bill 1509, An Act relative to excessive executive compensation. The bill requires for-profit, publicly-traded corporations and financial institutions to pay a higher corporate excise tax (2% of corporate income) if the CEO or highest paid employee earns more than 100 times what the median worker earns.
According to a study by the Center for Economic and Policy Research, if the minimum wage kept up with increases in worker productivity, the minimum wage would have approached $22 per hour in 2012. The point is that workers in Massachusetts and across America are working harder and harder, while the vast majority of the economic benefits funnel up to the top, leaving most behind. I hope that policy efforts like the new SEC rule and my legislation regarding executive compensation lead to more companies appropriately allocating a greater share of their financial successes with their hard-working employees, not just their executives.