"Get your facts first, and then you can distort them as much as you please." (Mark Twain)

Wednesday, May 18, 2005

An Immodest Proposal 

Amazingly, we have heard little followup from the Naked Emperor about his "progressive indexing" scheme for eviscerating reforming Social Security. I can't imagine why, given the warm reception the idea received.

That notwithstanding, I thought of "progressive indexing" again today as I read this post at The American Street. Writing about the nouveau haute topic of class in America, author Barbara O'Brien cites this article by Derrick Jackson in the Boston Globe. And this is what caught my eye:
In 1973, the ratio of CEO pay to worker pay was 43 to 1. By 1992, it was 145 to 1. By 1997, it was 326 to 1. By 2000, it hit a sky-high 531 to 1. The post 9/11 shakeouts and corporate scandals of recent years on the surface narrowed the gap back to 301 to 1 in 2003. But a much worse parallel global gap is emerging in the era of outsourcing. United for a Fair Economy published a report last summer that found CEOs of the top US outsourcing companies made 1,300 times more than their computer programmers in India and 3,300 more than Indian call-center employees.

Such groups say if the minimum wage kept up with the rise in CEO pay, it would be $15.76 an hour instead of its current $5.15. Looking at it another way, the Center on Budget and Policy Priorities, another often written-off liberal think tank, published a report last month that in the last three years, the share of US national income that goes toward corporate profits is at its highest levels since World War II, while the share of national income that goes to wages and salaries is at a record low.

That's when I had my "eureka moment" - what if we indexed the minimum wage to mean CEO salary? (I refer, of course, to the mean salary of CEOs, not the salary of mean CEOs. As far as I know, they're all really nice folks.)

After all, a rising tide is supposed to lift all boats, right? And while it's true that a minimum wage of almost $16 an hour might have some downside - at least, when viewed from the perspective of the shareholder class, if not when viewed from the perspective of the burger-flipper class - the solution is simple. Just keep those CEO salaries in check, and the dividends keep flowing. No problem.

The thing I really like about this idea is that it would be based on a nationwide average, and not on a particular firm's CEO compensation package. If a company is presented with a truly extraordinary candidate, then by all means, compensate that candidate accordingly. But they can't all be extraordinary, can they? If every board of directors insists upon compensating CEOs as though they are exceptional, it will hurt when the minimum wage gets adjusted to meet the mean CEO compensation level.

I'm sure that the Boy King will get on board, now that he's become such a fan of "progressive indexing." Some of his buddies might take a bit of convincing, though.




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