Eye-catching statistics about executive compensation tell us nothing about fairness, and distract from the real drivers of wage growth and worker prosperity.

Every few months a headline or social media post circulates declaring that a corporate leader earns hundreds or even thousands of times more than the typical employee, and recent examples are no exception: Costco’s outgoing CEO reportedly made 336 times the median worker’s pay (less than Walmart or Target), McDonald’s CEO earned more than 1,224 times the median McDonald’s worker, Starbucks’s CEO took in an eye-popping 6,666 times the median Starbucks employee, and Jeff Bezos — by one viral estimate — earns in a single hour what a minimum-wage worker would take nearly 3.8 million hours, or roughly 434 years, to earn.

The implication is clear: such a ratio (if correct, which in many cases is questionable) is self-evidently immoral, wasteful, or economically harmful. Yet the CEO-to-worker multiple survives largely because it is a noisy rhetorical device, not because it withstands the most superficial levels of analytical scrutiny. As an economic metric, it is close to meaningless. As a guide to policy, it actively misleads.



The first flaw appears in the basic concept of the argument. Flatly: a worker’s pay and an executive’s pay are not two points on the same labor-market spectrum. They reflect two entirely different markets. The average employee is hired under conditions of broad substitutability — many people can competently perform the role with modest training. The CEO labor market is the opposite: extremely small, specialized, global, and contingent on track records that can shift a firm’s valuation by billions of dollars. The demand curve for top executive talent is steep; the supply curve is extraordinarily thin. This mismatch — not a moral failure — explains why compensation packages at the top sometimes reach what seem like astronomical numbers. A ratio comparing two unrelated labor markets tells us no more about fairness than comparing the salary of a cardiothoracic surgeon to that of a street performer.



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