Why aren’t we upset that athletes occupy the one percent? Half of all NBA players’ annual salaries exceed two-million, which is more than five times the threshold for the top one percent of household incomes in the United States. Kobe Bryant, for example, earns more than twenty-five million a year, and Jeremy Lin is receiving the NBA’s “minimum wage” of $800,000 per year:
Yet many of these same fans would almost surely argue that CEOs of Fortune 500 companies, whose median compensation is around $10 million, are ridiculously overpaid. If a star basketball player reacts a split-second faster than his competitors, no one has a problem with his earning more for every game than five factory workers do in a year. But if, say, a financial trader or a corporate executive is paid a fortune for being a shade faster than competitors, the public suspects that he or she is undeserving or, worse, a thief.
Corruption and shady dealings notwithstanding, it’s hard to see why the public tolerates the disproportionate incomes of athletes but can’t stand the same for financial analysts (working sixty to seventy hours a week, making less). It can’t be that star athletes are role models; while many certainly are, there are also Michael Vick’s, Ron Artest’s, and Zinedine Zidane’s. And sports teams “lobby governments as aggressively as any big business.” Let us not forget that Jeremy Lin’s own story only emerged because of a the contentious labor dispute between NBA billionaire owners and its millionaire players over the league’s multi-billion dollar annual revenues.
Read more here
March 9th, 2012 | 11:31 am
Really? No one?
March 9th, 2012 | 11:38 am
We don’t cry “fowl” because we’re chicken.
Crying “foul,” on the other hand….
March 9th, 2012 | 11:43 am
I am about as far from being a sports fan as it is possible to be (although I know who Jeremy Lin is and am thrilled by his success), and I do object to the astronomical salaries of many CEOs. But I don’t object to the big bucks made by sports figures, movie stars, and writers like J. K. Rowling. If CEOs were paid according to their performance, it would be a different story. But they get whopping rewards whether their companies succeed or not, and they routinely get huge sums when they are fired—so-called golden parachutes.
There’s a very interesting chart over on Vox Nova giving the ration of pay for CEOs to the pay of the average worker. For Japan it is 11:1, for Germany 12:1, for France 15:1, and so on, with the second highest being Venezuela at 50:1. The highest, though, is the United States at 475:1.
If a professional athlete makes the difference between winning and losing, and between selling lots of tickets and few tickets, then they are worth the money. If a movie star makes the difference between a box office success and a flop, then he or she is worth the money. And of course if someone like J. K. Rowling’s books sell millions of copies, then she deserves every penny she gets.
March 9th, 2012 | 12:12 pm
I work at a university, and if you think no one here complains about the football coach’s salary, or the large amounts of money doled out to athletics, or even to the ridiculous salaries handed out in the wide world of sports, then you need to spend more time hanging out with faculty.
(Well, no, you don’t. That’s a punishment too cruel to inflict on mere mortals. But I like the phrasing, so I’m sticking with it.)
March 9th, 2012 | 12:27 pm
If CEOs were paid according to their performance, it would be a different story.
I’m thinking the real reason people object is because they either don’t understand or don’t approve of how capitalism works.
They can see how sales equals profits as long as the relationship is simple (the athlete/author creates high sales, ergo is worth high royalties), but as soon as incentives and guesswork is involved – and it becomes hard to measure – they don’t get what’s going on.
Consider: the same people who resent “the 1%” as a group tend to make an exception for (highly visible) Steve Jobs.
Someone should do a poll or a study or otherwise document the answer given to questions like, who exactly hires a CEO? And what exactly motivates that person/people/entity to pay so darned much?
I’d bet that the more they understand the process and the reasoning, the less likely they are to resent “the 1%”.
March 9th, 2012 | 12:38 pm
What’s amazing is that more self-defined Christians don’t see any injustice or absurdity at all in the way our markets reward different occupations and social positions (they might want to look at the Summa — or even, Heaven forbid — the Gospels, on distributive justice). And don’t give me some line about “marginal utility” theory (completely empirically unverifiable). Yeah, some CEO guy works seventy hours a week making phone calls and attending meetings, or playing a children’s game (e.g. baseball) professionally for fewer hours, while I work a mere 40 hours a week doing something highly skilled and socially contributive but poorly paid — surely those guys *deserve* to make 200 times what I do. Yeah, we are thoroughly ideologized little sheep, all right.
March 9th, 2012 | 1:13 pm
So what’s the answer HT? Confiscate wealth from the CEOs and give it to folks like you? IIRC, we tried that from the 1960s to the 1990s. It resulted in multigenerational dependence on government dole and an underclass plagued with drugs, crime, and violence so bad the military trained combat surgeons in our inner cities.
Or maybe you suggest we have a government agency decree what a “fair” salary is for a CEO and madate it by law. Leaving aside the irresistable temptation to corruption and abuse that would present, do you really want a bunch of bureaucrats who know absolutely nothing about business making decisions that people with an actual stake in the business should be making?
Or what? Enlighten us.
March 9th, 2012 | 1:30 pm
I would like to know why highly advanced economies like Japan and Germany have much lower CEO pay ratios. I’m not crying either “foul” or “fowl,” just curious as to why the ratio is so much lower there. I guess it’s probably because in Japan and Germany almost everyone has some kind of trade skill, their cultures seem more disposed to precision engineering, and there are higher percentages of people with advanced degrees than in the US.
Still, it’s hard to figure out why the ratio is so much higher. The US is not 45 times more productive than Japan and Germany. Clearly, it’s quite possible to have a highly productive economy without paying CEO’s so much. I’m not saying that they don’t deserve it in some sense, I’m just wondering why stock-holders put up with such high salaries, when the job can (apparently, in Japan and germany) be done with much less.
March 9th, 2012 | 1:33 pm
Here is a possible disanalogy:
No-one contributes to the salaries of athletes unless he either pays voluntarily to see the athletes perform, or tries to make money from the athletes’ performance by e.g. broadcasting it.
In contrast, everyone has a bank account, pension etc. And when a finance worker takes a very large salary, this takes money out of the pot which might otherwise have gone to the person whose pension it is.
Furthermore, there is well-grounded suspicion that the large portions taken out of such pots by finance companies represents rent-seeking rather than added value.
March 9th, 2012 | 2:07 pm
…who exactly hires a CEO? And what exactly motivates that person/people/entity to pay so darned much?
This, I think, is the point that needs to be made. Athletes/entertainers/CEO’s don’t “make” money, as if out of thin air–somebody freely and voluntarily pays them. You cannot condemn someone for accepting a high salary without implicitly condemning the one who willingly offers the salary.
At the root of the resentment is materialism and envy, and the mistaken belief that your personal moral worth as a human being is tied to the market value of your occupation.
March 9th, 2012 | 2:23 pm
@Klingsor
Unfortunately for your disanalogy, bank accounts and retirement plans (the defined contribution type, at least) are also voluntary. If you don’t think they add value, you have a mattress.
A finance worker doesn’t take a large salary, he accepts a large salary.
March 9th, 2012 | 4:46 pm
David,
The chart you cite is well, not to put too fine a point on it, false amd misleading. Says who? Politifact among others… But we’ll let them say so:
“This is a textbook example of how claims can spiral out of control on the Internet. Just as conservatives have circulated unfounded claims about President Barack Obama’s birth certificate, liberals are spreading this questionable chart.
We don’t doubt the chart’s underlying point that the ratio of CEO pay to worker pay is high in the United States, and is likely higher in our free-wheeling economy than it is in the historically more egalitarian nations of Europe.
But in its claim that the U.S. ratio is 475 to 1, the chart conveys a sense of certitude and statistical precision that simply isn’t warranted — and which is contradicted by the facts. The latest number for the U.S. is 185 to 1 in one study and 325 to 1 in another — and those numbers were not generated by groups that might have an ideological interest in downplaying the gaps between rich and poor. We rate the claim on the U.S. ratio False.
In other words…we are in Dan Ratherian “fake but true” territory with this chart.
March 9th, 2012 | 6:07 pm
I know a lot of progressives who argue for higher tax rates on high incomes. I don’t know of any of these who are seeking to make exceptions for athletes or sports team owners.
I expect, moreover, that any mystery here would dissolve if we gave a halfway charitable interpretation to what it is people are upset about with regard to the income/wealth/opportunity disparities in this country.
March 9th, 2012 | 10:17 pm
What a company pays its CEOs is nobody’s business but the company’s board of directors and their shareholders. Jealously kills more people in this country than cancer … And for anyone to make the argument that pampered athletes and movie stars deserve their high salary more than corporate CEOs, who at least contribute something in the form of actual job creation, is truly a sign of the distorting effect of America’s toxic celebrity culture.
March 9th, 2012 | 11:51 pm
David Nickol already said what I wanted to, so I will echo him. Pro athletes earn their money. They bring in millions in revenue.
Blake says, I’m thinking the real reason people object [to CEO's getting high salaries] is because they either don’t understand or don’t approve of how capitalism works.
They can see how sales equals profits as long as the relationship is simple (the athlete/author creates high sales, ergo is worth high royalties), but as soon as incentives and guesswork is involved – and it becomes hard to measure – they don’t get what’s going on.
Sorry, Blake, but I do know what is going on. Those rich bankers get rich by ruining the economy. Yes, they literally, ruined our economy. They lied about assets, they pushed up the price of commodities through speculation, they passed off toxic assets to investors, many of whom included public retirement funds, then made $$millions$$ extra through CDOs, which is basically betting that those bad assets deceitfully passed off will fail, and then, to top it off, they got billions in government bailout money to stave off a national economic crash that they were responsible for precipitating.
So, yes, I begrudge CEOs their pay. No, I do not begrudge hard working athletes, actors, and musicians, who overcome long odds and strike it big for a short period. Remember, pro athlete careers are short. Unlike CEOs, they don’t have a 30 year career of making $5 million per year.
Finally, it’s good to remember that for every $10 million Major League Baseball player, there are many more toiling away in the minor leagues, making $300 a week. For every $20 million per film movie star, there are many more struggling actors getting a bit part here and there, making ends meet waiting tables.
March 10th, 2012 | 3:08 am
david c,
Thanks for pointing out the questionable nature of the chart I linked to. I see that Vox Nova now has updated the post containing the chart with a link to Politifact. I apologize for linking to it without doing some checking up on it. However, the point of my post wasn’t the exact ratio of CEO pay to that of the average worker, but the reason why, in my opinion, people don’t resent the fact that many professional athletes are highly paid.
March 10th, 2012 | 8:53 am
I do not begrudge the wealthy one farthing of their wealth – I just want them to pay at a reasonable tax rate.
March 10th, 2012 | 10:07 am
“… it’s hard to see why the public tolerates….”
It’s hard to see why it’s the public’s business.
March 10th, 2012 | 6:52 pm
Sorry, Blake, but I do know what is going on. Those rich bankers get rich by ruining the economy
And yet the people saying this are people who grew up in the most affluent conditions known to the history of mankind, where people of moderate means have advanced computers, fast cars, and expensive toys – and even the poorest people in our nation enjoy air conditioning and have enough to eat.
Compare this against places that don’t have any such CEOs – either our world before the current economic conditions, or other parts of the world. Would you trade your current situation for
- the housing they live in?
- the food they eat (or don’t eat)?
- the gadgets they own (or don’t own)?
- the transportation they have access to (or not)?
Your resentment and jealousy are blinding you to the fact that you live in a place where even during an economic downturn, we are all at the very top of the world’s affluence – and we are all taken care of, to the point where starvation does not even kill the poorest of us.
There are problems – I am particularly worried about corruption being and becoming a greater problem, and that’s problematic. But don’t respond to those problems by throwing a tantrum or having a jealous snit. Nobody is going to take that seriously, and it’s not going to change the world. Instead of educating yourself on all the grievances there are to complain about, you could be educating yourself on all the ways small business owners have managed to succeed, bringing wealth to both themselves and the nation. Some of the wealthiest people in America today were born into the ordinary middle class.
You can do great things, or you can wallow in jealousy, but you can’t do both – at least not at the same time.
Finding and fixing problems in the system is another great thing that could be done. A society gets what it rewards, so what we believe – and how we design systems based on what we believe – and how we execute those systems – these are the variables that determine whether we will have a good, sound system or whether we will have corruption, growing imbalance, and excess – or whether we will have collapse. And this is up to all of us, collectively – some people have the power to influence others, of course; if you had something constructive to say it could be you that others listen to, and are influenced by.
Just remember: there is no way to tear down corporate America without plunging us all into collapse – and that means, no matter where you are on the socioeconomic scale, the more your jealousy succeeds at smashing and breaking and hurting, the more your own standard of living is going to plunge…everyone’s will, with the (ironic) exception of the super wealthy, who have the security and the resources to weather whatever damage the jealous ones wreak to our economy.
March 11th, 2012 | 1:58 pm
Instead of educating yourself on all the grievances there are to complain about, you could be educating yourself on all the ways small business owners have managed to succeed, bringing wealth to both themselves and the nation. Some of the wealthiest people in America today were born into the ordinary middle class.
Blake, I support small business owners. It’s great that self starters can become millionaires, just like it’s great that athletes, actors, and musicians can hit the big time. They are not the problem. They are what capitalism is all about.
What capitalism is NOT all about is Wall Street rigging the system. Those big bankers really are bad. They are evil. Goldman Sachs provides nothing of real value. They lie about bad assets, they drive up the price of commodities that deserve to have their prices set by supply and demand rather than speculation. It is fundamentally wrong to sell bad assets to investors and then turn around and make money betting on the very failure of those bad assets.
I’m sorry, but it’s not jealousy to call out criminals for lying and stealing. What the big Wall Street investment firms have engaged in is deceit and robbery.
Wall Street has consistently broken the 7th and 8th commandments. And I get accused of breaking the 10th for calling Wall Street out?
March 12th, 2012 | 8:59 am
Publius –
Of course, oh-so-frequently, the CEO of one company is on the board or close friends with board members of other companies… and vice versa. Add in a little corruption (which Blake acknowledges above) and the situation is ripe for exploitation. “If I vote for a high salary for them, then they’ll vote for a nice compensation package for me, too.”
The systemic tendency to focus on short-term stock price rather than long-term growth also encourages – ahem – ‘profit taking’ as well.
March 12th, 2012 | 11:04 am
“Of course, oh-so-frequently, the CEO of one company is on the board or close friends with board members of other companies… and vice versa. Add in a little corruption (which Blake acknowledges above) and the situation is ripe for exploitation. ‘If I vote for a high salary for them, then they’ll vote for a nice compensation package for me, too.’”
“The systemic tendency to focus on short-term stock price rather than long-term growth also encourages – ahem – ‘profit taking’ as well.”
It goes without saying that the free-market is subject to corruption by sinful human beings. The real question is whether a “law” administered by other sinful human beings will result in a net improvement over the free-market answer. The answer to this question is the line of demarcation between the worldviews of free-market libertarians and government interventionists.
March 12th, 2012 | 12:11 pm
pauld –
There’s actually a rather large border – a continent, almost – between those regions. The ‘free market’ can’t exist without government intervention; if nothing else, police and contract law and so forth. And outside of dystopian fiction, no government’s ever regulated everything people do.
The ‘answer’ to your question is actually multiple answers to multiple questions.
March 12th, 2012 | 2:29 pm
Add in a little corruption (which Blake acknowledges above) and the situation is ripe for exploitation.
Corruption is a separate problem.
Corruption is not caused by capitalism. There is no system on Earth – now or at any time in its history – that is not vulnerable to corruption.
So it is important to recognize that corruption, as a problem that needs to be fixed, is not synonymous with either pro-capitalism or anti-capitalism views.
A lot of the rage some people have at various systems appears to be influenced by their inability to distinguish the system’s features from corruptions of the system. Capitalism does not cause corruption – and by the same token Christianity did not cause the Inquisition; corruption did (Christianity merely failed to prevent it) – and very frequently, the solutions put forward to “solve” the problems of corruption by starry-eyed idealists (solutions such as socialism, communism, or authoritarian impulses described in ways that are meant to downplay how totalitarian they are) are more likely to increase than decrease corruption levels.
March 12th, 2012 | 2:36 pm
What capitalism is NOT all about is Wall Street rigging the system.
Adam Smith wrote about this problem in 1976: that one of the problems of capitalism is that those with wealth are immediately going to turn around and use their wealth to block those coming behind them.
It is one of the hazards of capitalism.
There’s no such thing as a perfect system, and capitalism isn’t perfect either. There is a tension that needs to be maintained – where people need to be allowed to keep what they’ve earned, but at the same time not so much so that we collapse into oligarchy.
This is not a function of how much money anyone has, but rather how much political power. Treating the two as synonymous is a mistake – as is any theory that confuses the role of economics with the role of politics. The two are not identical: each checks the other (and heavy-handed use of politics can and will destroy the economy: politics should be used where necessary but nowhere else).
March 12th, 2012 | 2:40 pm
I’m sorry, but it’s not jealousy to call out criminals for lying and stealing. What the big Wall Street investment firms have engaged in is deceit and robbery.
Wall Street has consistently broken the 7th and 8th commandments. And I get accused of breaking the 10th for calling Wall Street out?
What you are calling Wall Street is an economic entity. It is supposed to be covetous: it has no existence aside from its purpose, which is to create wealth.
Judging Wall Street to be “bad” or “immoral” is not helpful. It does not solve any problems; at best, it just creates new problems. Wall Street is not a person. It is an entity designed for the express purpose of creating money.
I don’t know what you think you will gain by trying to label money bad, immoral – and the people who have it as bad and immoral – on the one hand, when really all you want is more of it yourself. You can’t have it both ways.
March 12th, 2012 | 10:28 pm
Judging Wall Street to be “bad” or “immoral” is not helpful. It does not solve any problems; at best, it just creates new problems. Wall Street is not a person. It is an entity designed for the express purpose of creating money.
I don’t know what you think you will gain by trying to label money bad, immoral – and the people who have it as bad and immoral – on the one hand, when really all you want is more of it yourself. You can’t have it both ways.
Blake, I’m happy with the job I have and the money I have. I have nothing against wealth or making money. Again, my problem is with people who intentionally lie and cheat, and those people, while not all of Wall Street, are particular people who work for financial institutions in the financial center, and use their power as part of those financial institutions to lie and steal from average Americans. I’m am talking about the particular economic crisis caused by Alan Greenspan, Lloyd Blankfein, nonsensical Randian followers, Goldman Sachs, AIG, et al, in the first decade of the 21st century.
Are you not familiar with Matt Taibbi’s long investigative journalism report on Goldman Sachs and that company’s history of ethically dubious ventures? I’m sure you’ve seen his money quote, The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.
I’d also recommend Taibbi’s book on the economic crisis, Griftopia.
March 13th, 2012 | 11:21 am
Again, my problem is with people who intentionally lie and cheat, and those people, while not all of Wall Street, are particular people who work for financial institutions in the financial center, and use their power as part of those financial institutions to lie and steal from average Americans.
You can just tell with a glance which people are crooks and should suffer penance for the economic ills of America, eh?
Well, I believe in the right to a fair trial, and I also believe that if the system is broken, that instead of looking for a jack-a-lent to throw stones at, we should try to figure out why things went wrong. I am quite sure there are a number of problems that need to be addressed, but I am repulsed by the blame-and-pitchfork mentality I see here. I think the urge toward scapegoating is one of the ugliest aspects of humanity’s fallen nature, and it needs to be “called out” every bit as much as any other vice does.
March 13th, 2012 | 11:26 am
I’d also recommend Taibbi’s book on the economic crisis, Griftopia.
I see the basic problem with the economic crisis as follows: neither the Republicans nor the Democrats are interested in listening to or protecting the interests of the people they claim to represent. For whatever reason, our political system is not responsive, and if we can’t figure out how to make it responsive, we’re in big trouble.
March 13th, 2012 | 5:51 pm
I see the basic problem with the economic crisis as follows: neither the Republicans nor the Democrats are interested in listening to or protecting the interests of the people they claim to represent. For whatever reason, our political system is not responsive, and if we can’t figure out how to make it responsive, we’re in big trouble.
Blake, I agree. And, considering that Kevin Williamson wrote basically the same thing about Wall Street in the National Review as Taibbi did in his book and Rolling Stone leads me to agree that neither party is truly interested in representing the people that elect them.
March 14th, 2012 | 8:27 pm
In light of this op-ed in today’s New York Times by a former Goldman Sachs executive who resigned this morning, I think my comments on Wall Street stand.
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