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Wealth transfer: income inequality

Key Points

  • Research suggests that since the 1980s, regular workers’ incomes have largely stagnated, while higher-level salaries, especially for executives, have grown dramatically, with CEO pay increasing over 1,000% compared to modest gains for typical workers.

  • It seems likely that regular workers have seen a decline in traditional benefits like pensions, shifting to less secure options, while higher-level employees likely enjoy more comprehensive benefits, including supplemental retirement plans and perks.

 

Income Comparison

Since the 1980s, regular workers’ wages have barely budged when adjusted for inflation. For example, by 2018, median household income was no higher than in 2000, indicating a 15-year stagnation period. In contrast, executive compensation, particularly for CEOs, has soared, with pay increasing by 1,209.2% from 1978 to 2022, while typical workers’ pay rose only 15.3% over the same period. By 2020, CEOs earned 351 times more than typical workers, up from 61-to-1 in 1989.

 

Benefits Comparison

For regular workers, benefits like defined benefit pensions have declined, with only 5% of organizations offering them to new hires by 2020, down from 48% in 2000. Health insurance coverage also dropped, from 62% in 1980 to 51% in 2013. Higher-level employees, however, likely have access to better benefits, such as supplemental executive retirement plans (SERPs) and enhanced health insurance, with 44% of management workers having access to Health Savings Accounts in 2018 compared to 11% of service workers.

 

 

Survey Note: Detailed Analysis of Income and Benefits Trends Since the 1980s

 

This note provides a comprehensive analysis of the trends in income and benefits for regular workers compared to higher-level employees, particularly executives, since the 1980s. The data is drawn from various economic reports, including those from the Economic Policy Institute (EPI), Bureau of Labor Statistics (BLS), Pew Research Center, and other reputable sources, to ensure a thorough understanding of the divergence over time.

 

Income Trends: Regular Workers vs. Higher-Level Employees

 

Regular Workers’ Income:

 

Higher-Level Employees’ (Executives) Income:

 

Comparison Table: Income Growth Since 1978:

| Group | Growth Rate (1978–2023) | Notes |

|———————–|————————-|———————————————————————-|

| Regular Workers | 15.3%–24% | Stagnant real wages, adjusted for inflation, with most gains at the top. |

| CEOs/Executives | 940%–1,209.2% | Driven by stock options, bonuses, and market trends, far outpacing workers. |

 

Benefits Trends: Regular Workers vs. Higher-Level Employees

 

Regular Workers’ Benefits:

 

Higher-Level Employees’ (Executives) Benefits:

  • Higher-level employees, including executives, generally have access to more comprehensive and flexible benefits compared to regular workers. While specific historical data is limited, it is implied that executives have benefited from trends like personalization and innovation in benefits. For example, in 2018, 44% of management, professional, and related workers had access to Health Savings Accounts (HSAs), compared to only 11% of service workers, suggesting better access for higher-level employees [BLS, 2019, https://www.bls.gov/opub/btn/volume-8/compensation-trends-into-the-21st-century.htm].

  • Executives often have access to supplemental executive retirement plans (SERPs), which are defined benefit plans tailored for high-level employees and not subject to the same regulatory constraints as traditional pensions. This allows for higher benefits, as noted in various compensation reports [Workplace Consultants, https://workplaceconsultants.net/commentary/retirementtsunami/the-history-of-benefits/].

  • Access to retirement plans is also higher for executives. In 2018, 80% of management, professional, and related workers had access to defined contribution plans, with 67% participation, compared to 41% access and 22% participation for service workers. For defined benefit plans, 24% of higher-level workers had access, compared to 10% for service workers [BLS, 2019, https://www.bls.gov/opub/btn/volume-8/compensation-trends-into-the-21st-century.htm].

  • Executives may also receive additional perks such as company cars, club memberships, relocation assistance, and post-retirement benefits, which are less common for regular workers. Health insurance plans for executives are likely more robust, with lower out-of-pocket costs and higher coverage rates, though specific historical data is sparse.

 

Comparison Table: Benefits Access in 2018 (Example for Recent Trends):

| Benefit Type | Regular Workers (Service, %) | Higher-Level Workers (Management, %) |

|—————————-|——————————|————————————–|

| HSA Access | 11 | 44 |

| Defined Contribution Access| 41 | 80 |

| Defined Benefit Access | 10 | 24 |

 

Factors Contributing to the Divergence

 

 

Conclusion

 

Since the 1980s, there has been a stark contrast between the income and benefits of regular workers and higher-level employees:

  • Income: Regular workers have experienced wage stagnation, with real wages barely increasing since 1978, while executive compensation has grown by over 1,000%, far outpacing productivity and stock market gains.

  • Benefits: Regular workers have seen a decline in traditional benefits like defined benefit pensions and employer-sponsored health insurance, with a shift toward less secure defined contribution plans. Higher-level employees, however, continue to enjoy more comprehensive benefits, including access to SERPs, better health insurance, and additional perks.

 

This divergence reflects broader economic and policy trends that have favored higher-level employees while leaving regular workers with limited income growth and reduced benefits, highlighting the growing income inequality in the U.S. economy.