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Why Should a CEO be Paid 600 Times as Much as an Employee?

See how wage gaps are destroying the U.S. economy

By Sybil Morneau
Published on March 18th, 2018

When choosing a career you must decide what is most important to you: compensation or job satisfaction? Personal and professional fulfillment can go very far for some people, and might be the primary thing they care about. For others it boils down to total compensation (the value of their pay and benefits package). Then there are those who fall in the middle, aiming for some sort of combination of strong compensation and a reasonable level of job satisfaction. When researching potential careers it is important to consider your goals and preferences to help guide you towards a fruitful path. The most glaring example of the disparity between work performed and money collected is evident when reviewing CEO compensation versus regular worker pay.

Many large corporations are guilty of creating enormous wage gaps and contributing to the uneven distribution of wealth in our society. Lets look at some of the following examples and see if we can better understand the difference in pay between different types of employees.

First lets look at which factors determine pay rates. Traditionally, the value of an employee would be measured by their productivity (measured by how much they can generate for the company). For example, if a worker can build 5 widgets per hour and each widget uses $5 of materials and sells for $20 at a 50% profit margin that means that the worker is generating real value of $25 per hour. The company can therefore afford to pay the worker anywhere between minimum wage and $25 per hour. This is a very simplified example of how productivity leads to wage determination. Now lets look at some actual worker compensation rates and executive compensation.

First case study will be Chipotle Mexican Grill (stock symbol CMG). The average Chipotle worker who can be found in any of their retail locations shoveling pinto beans into a tortilla for 8 hours every day earns approximately $12/hour. Meanwhile, the CEO Steve Ells has been collecting roughly $15 million in total compensation per year over the last few years. This rounds out to about $7,211 per hour. So the next question we need to ask is: what is this individual doing during his time that makes his value so incredibly high? What revenue is he generating for the company to justify his extreme rate of pay? If a typical worker is only valued at $12/hour why is he valued at 600 times that amount? Why is this man worth as much as 600 people?

The answer is that there is nothing on this planet that can make an individual so valuable short of having superhuman powers. Or being such an amazingly popular athlete or individual that commands such a high price of admission to simply view their skill set, such as a Lebron James. The answer is Capitalism: this type of wage disparity can only exist in a capitalist society where all of the money flows to the top and workers are left hanging on by a shoestring. There is no logical or economic explanation for this scenario, it is simply a function of the society that we live in.

In conclusion, when choosing a career it is important to consider the current economic system in America, what you are seeking in terms of compensation and lifestyle, what you are willing to accept and what your priorities are. Start looking at RN, LPN and CNA programs to become a Nurse, and join a noble profession that is challenging yet rewarding, and comes with a nice salary!



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