Wage Gap Increases With Downsizing

In 1996, more than 40,000 workers at 30 firms lost their jobs due to corporate downsizing, yet the CEOs of these firms took home higher than average salary rewards for these lay-offs, reveals a study put out by the D.C.-based Institute for Policy Studies and Boston-based United for a Fair Economy.The report, "Executive Excess: CEOs Gain From Massive Downsizing," found that in 1996, the CEOs received an average increase in total direct compensation of 67 percent, whereas the average U.S. worker earned only a 3 percent raise in wages. The report also revealed that the average gap between the CEOs' salary and bonus and the wage of their lowest paid full-time worker was 178 to one."The layoff leaders' fat pay packages reveal the perverse incentives in our economy," said John Cavanagh, co-director of the Institute for Policy Studies. "CEOs should be rewarded for creating good jobs not for destroying them. These CEOs claim that they have to lay people off to strengthen their businesses. But we are skeptical when all the compensation savings go into the CEO's pockets."The report points to AT&T's CEO Robert Allen as the leader of downsizing with his announcement of 49,000 AT&T layoffs last year. Allen's salary and bonus compensation for 1996 totaled more than $2.4 million. Comparing that to the $10,500 made by the lowest-paid full-time worker at the company, Allen takes home a pay-check 232 times greater the amount."It is bad enough that CEOs profit from the pain of massive layoffs, but we also subsidize it through the tax code," said Marc Bayard of United for a Fair Economy. "Because corporations deduct excessive pay from their taxes, the remaining taxpayers pick up the tab."The report points to various ways from which the wage gap can be closed, including corporate self-regulation, government capping of deductible pay, a raise in the federal minimum wage and investor activism such as shareholder resolutions.For more information or for a copy of the 20-page report, contact Sarah Anderson at 202-234-9382, ext.227, or Marc Bayard at 617-423-2148.

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