Executive Pay Rise Cause Of Widening Income Gap In United States
Vittorio Hernandez

June 23, 2011

New York, NY

A report based on an analysis of tax returns by three economists pinpoints rising executive compensation as the reason behind the widening income gap in the United States.

According to economists Jon Bakija, Adam Cole and Bradley Heim, excessive executive pay is enjoyed not only by Wall Street bankers, but also company officials even in smaller businesses.

The report said that the top .01 percent of American executive earners make $1.7 million or more, including capital gains, yearly. About 41 percent of them were executives, managers and supervisors at non-financial firms. About half of them source them income from being the owner of the company.

Another 18 percent of the top earners were managers at financial companies or are financial professionals at any kind of firm.

The growing income disparity in the U.S. was particularly felt in the recent global financial crisis as ordinary wage earners lost their jobs, had their properties foreclosed and had to tighten their belts. Amid the hard times, executives continued to receive seven-digit incomes.

In 2008, the top 0.1 percent of earners in the U.S. accounted for over 10 percent of the national income in the U.S., while the top 1 percent got more than 20 percent.

Another study of executive pay among Standard & Poor's 500-stock index companies by an independent research firm in Baltimore showed that total executive compensation grew by 13.9 percent in 2010 among the 483 companies with available data. Their total pay for 2,491 named executives, before taxes, was $14.3 billion.