Gap Widening Between the Rich and Super Rich

What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Income inequality between the top 1 percent and 0.1 percent has outpaced that between the rich and everyone else. Compensation for CEOs is a major reason for that.

Americans know that economic inequality – the gap between the rich and everyone else – has grown significantly. But income inequality among the wealthy is growing even faster.

The New York Times reports that the income gap between the top 1 percent and top 0.1 percent has expanded even more than the divide between the 99 percent and the 1 percent. Economists have coined the phenomenon “fractal inequality.” The Times says:

It is not just that the rich have pulled away from the average American. It is that the richer you are, the more you have pulled away.

A report from the Economic Policy Institute says, “The average annual earnings of the top 1 percent of wage earners grew 156 percent from 1979 to 2007; for the top 0.1 percent they grew 362 percent.”

To put this into perspective, in 2012, the average household income was distributed as follows, according to the Times:

  • $30,997 – bottom 90 percent.
  • $1.26 million – top 1 percent.
  • $6.37 million – top 0.1 percent.

Part of what’s driving this is CEO pay. “Executives, and workers in finance, accounted for 58 percent of the expansion of income for the top 1 percent and 67 percent of the increase in income for the top 0.1 percent from 1979 to 2005,” the institute report says.

From 1978 to 2011, compensation for chief executives skyrocketed 725 percent, while workers experienced a 5.7 percent increase, the Times reports. The ratio of chief executive to worker compensation has ballooned from 18-to-1 in 1965 to 209-to-1. The Times adds:

Not all of that increased compensation for managers is because of improving performance, either. The growth of earnings for executives has outpaced growth in the stock market or in corporate earnings, by a wide margin.

Several explanations have been offered for that — boards that are very CEO-friendly, and the “peer benchmarking” system of determining CEO pay.

James Surowiecki of The New Yorker explains:

They look at the CEO salaries at peer-group firms, and then peg their CEO’s pay to the 50th, 75th, or 90th percentile of the peer group — never lower. This leads to the so-called Lake Wobegon effect: Every CEO gets treated as above average. With all the other companies following the same process, salaries ratchet inexorably higher.

Thanks to new rules, we know more than we ever did about CEO pay. But now the Securities and Exchange Commission is considering a rule to require public companies to disclose the ratio between the CEO’s compensation and the median compensation of all other employees.

What do you think? Would that help control the growth of CEO pay? Share your comments below or on our Facebook page.

Karen Datko contributed to this post. 

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: 5 Easy Ways to Save on Your Cell Phone Bill

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,066 more deals!