Chief executive officers (CEOs) of the largest companies in the U.S. have seen their pay skyrocket by 1,085% since 1978, while the average worker’s pay has increased by just 24 percent, according to a new report by the Economic Policy Institute (EPI). This widening gap reflects a troubling trend in the U.S. economy, where wealth continues to concentrate at the top, leaving ordinary workers behind.
The EPI analysis, which focuses on the 350 largest publicly traded U.S. firms, shows a staggering disparity between executive compensation and worker wages. The report highlights the structural inequities in corporate America that have allowed CEOs to amass extraordinary wealth while wages for workers have stagnated. It also raises questions about the role of corporate governance, stock-based compensation, and the impact of this pay gap on the broader economy.
The data from EPI reveals the stark contrast in pay growth between CEOs and workers over the past five decades. In 1978, the average realized compensation for a CEO was $1.9 million (adjusted for inflation). By 2023, that figure had ballooned to $22.2 million. During the same period, the average private-sector worker saw their pay increase from $57,000 to just $71,000—a mere 24 percent rise, failing to keep pace with inflation and rising living costs.
One of the most striking findings is the change in the CEO-to-worker compensation ratio. In 1965, the ratio was 21-to-1. By 2023, this ratio had exploded to 290-to-1, underscoring the growing concentration of wealth among top executives. This disparity is even more pronounced when compared to high-wage earners. EPI found that in 2022, CEOs made 9.4 times more than the top 0.1 percent of wage earners, a significant increase from the 2.6 ratio observed between 1965 and 1978.
The EPI report highlights how stock-based compensation has played a significant role in this growth. Stock options and awards, which are tied to market performance, have driven much of the increase in CEO pay, creating a direct link between executive wealth and stock market gains.
One of the key drivers of the dramatic rise in CEO compensation is the increasing reliance on stock-based pay. In 2023, stock-related pay—such as exercised stock options and vested stock awards—made up 77.6 percent of the average CEO’s realized compensation, amounting to $16.7 million on average. This marks a shift from previous years, as stock options, which once dominated CEO pay packages, now make up just 22 percent of stock-related compensation.
The report also noted a 19 percent drop in realized CEO compensation from 2022 to 2023, but even with this decline, the level of CEO pay remains historically high. Economic justice advocates argue that the excessive reliance on stock-based pay encourages short-term decision-making, leading CEOs to prioritize immediate stock performance over long-term company growth and worker welfare.
The growing gap between CEO and worker pay has deepened economic inequality in the United States. According to EPI chief economist Josh Bivens, this disparity is not due to an extraordinary skill set or contribution made by CEOs, but rather because of their “extraordinary leverage over corporate boards.” Bivens emphasized that exorbitant CEO pay has concentrated earnings at the top, leaving fewer gains for ordinary workers and contributing to the rising inequality seen in recent decades.
EPI’s report points to the fact that CEOs now earn far more than even the wealthiest workers, with the CEO-to-worker compensation ratio surpassing historical averages by a wide margin. The impact of this income concentration is felt throughout the economy, as workers face stagnant wages, rising living costs, and diminished economic mobility. The slow growth of worker pay has left many struggling to keep up with inflation, while CEOs continue to reap enormous financial rewards.
The EPI report argues that this growing inequality not only harms workers but also has broader economic implications. When wealth is concentrated at the top, it reduces the purchasing power of the middle and lower classes, which in turn weakens consumer demand and slows economic growth.
The EPI report calls for a range of policy interventions to address the growing CEO-worker pay gap and reduce economic inequality. One of the primary recommendations is to increase corporate tax rates for companies with high CEO-to-worker pay ratios. By imposing financial penalties on firms with excessive executive compensation, policymakers can create incentives for companies to rein in CEO pay.
Additionally, the report advocates for higher marginal income tax rates on top earners, which would help curb the concentration of wealth among the ultra-rich and redistribute income more equitably. Strengthening corporate governance rules is another key recommendation, aimed at preventing CEOs from using their influence over corporate boards to secure excessive compensation packages.
EPI senior economist Elise Gould argues that these policies are necessary to prevent the U.S. from becoming a “winner-take-all” society, where a small elite controls the majority of the nation’s wealth. “Policies that limit CEOs’ ability to collude with corporate boards to extract excessive compensation are needed to prevent the U.S. from becoming a winner-take-all society,” Gould said.
Beyond compensation reform, the EPI report also highlights the need for corporate accountability. A joint study by Americans for Tax Fairness and the Institute for Policy Studies found that 35 major U.S. corporations, including Ford, Netflix, and Tesla, paid their top executives more in compensation than they paid in federal taxes between 2018 and 2022. This ability to avoid taxes while paying CEOs millions underscores the need for comprehensive tax reforms.
By closing corporate tax loopholes and implementing stronger corporate accountability measures, policymakers can ensure that companies contribute their fair share to the economy and do not disproportionately reward their executives at the expense of workers and taxpayers.
The findings from the EPI report underscore the urgent need to address the growing disparity between CEO and worker pay. The 1,085% increase in CEO compensation since 1978, compared to just 24 percent for workers, reflects deep-seated inequalities that continue to erode the foundations of the U.S. economy. However, as Bivens noted, “The silver lining in this otherwise unfortunate trend is that CEO pay can be curtailed without damaging economywide growth.”
By implementing targeted tax reforms, strengthening corporate governance, and ensuring fair compensation practices, the U.S. can begin to close the income gap and create a more equitable economy for all. As Elise Gould emphasized, “Policies that limit CEOs’ ability to collude with corporate boards to extract excessive compensation are needed to prevent the U.S. from becoming a winner-take-all society.”
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