Explaining CEO pay, dissecting Russia-China trade, the price tag of US government shutdown & the pace of climate change

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Yan Pei-Ming was born to a family of factory workers in Shanghai in 1960. He was introduced to painting through art propaganda classes during the Cultural Revolution. Above: Mao Rouge, 2006. Source: Dream Idea Machine

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The C-suite breakout

The last four decades have seen real average take-home pay growing sluggishly in the United States, while at the top end of the pay spectrum the story is very different. But is this just a tale of high earners vs low earners, or one about power at the point of production? The real story is a little more complex than Occupy’s 99% vs 1% binary, and even more striking. Some lessons to make sense of the pattern:

• CEO pay is linked strongly to the stock market—and market declines in 2022 led to an uncharacteristic dip in CEO pay.  

• Cumulatively, however, from 1978–2022, top CEO compensation shot up 1,209.2% compared with a 15.3% increase in a typical worker’s compensation. 

• In 2022, CEOs were paid 344 times as much as a typical worker. In 1965, by contrast, they were paid 21 times as much as a typical worker. 

• Changes in the CEO-to-top-0.1% compensation ratio. CEO compensation has even been breaking away from that of other very highly paid workers. Over the last three decades, compensation grew far faster for CEOs than it did for the top 0.1% of wage earners. CEO compensation in 2021 (the latest year for which data on top 0.1% wage earners are available) was 7.68 times as high as wages of the top 0.1% of wage earners, a ratio 4.1 points greater than the 3.61-to-1 average CEO-to-top-0.1% ratio over the 1951–1979 period.

• Implications of the growth of CEO-to-top-0.1% compensation ratio. The fact that CEO compensation has grown much faster than the pay of the top 0.1% of wage earners indicates that CEO compensation growth does not simply reflect a competitive race for skills (the “market for talent”) that would also increase the value of highly paid professionals more generally. Rather, the growing pay differential between CEOs and top 0.1% earners suggests the growth of substantial economic rents (income not related to a corresponding growth of productivity) in CEO compensation. CEO compensation does not appear to reflect the greater productivity of executives but their ability to extract concessions from corporate boards—a power that stems from dysfunctional systems of corporate governance in the United States. But because so much of CEOs’ income constitutes economic rent, there would be no adverse impact on the economy’s output or on employment if CEOs earned less or were taxed more.

• Growth of top 0.1% compensation (1979–2021). Even though CEO compensation grew much faster than the earnings of the top 0.1% of wage earners, that doesn’t mean the top 0.1% fared poorly. Quite the contrary. The inflation-adjusted annual earnings of the top 0.1% grew 465% from 1979 to 2021. CEO compensation, however, grew more than 2.5 times as fast!

• Impact on overall inequality. Most of the rise in inequality took the form of redistributing wages away from the bottom 90%. This group’s share of total wage income fell from 68.8% in 1979 to 58.5% in 2021. Most of the loss experienced by the bottom 90% went to the top 1%, whose wage share doubled from 7.3% to 14.6% in these same years. And even among this gain going to the top 1%, most of it went to the top 0.1%, who saw their share of overall wage income more than triple from 1.6% to 5.9% between 1979 and 2021. In other words, the bottom 90% had 10.3% of total wage income taken from them between 1979 and 2021, and that about 70% of this loss (7.3 of 10.3 percentage points) went to the top 1%, and 40% (or 4.3 of 10.3 percentage points) went to just the top 0.1%.

Source: EPI

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Container pile up in Russia

Western sanctions on Russia have not met the ambitions of French Economy Minister Bruno Le Maire, who predicted the “collapse” of the Russian economy in 2022. Such are the shifting sands of geopolitical and geoeconomic hegemony; Le Maire spoke of “economic war” against Russia, but the country now exports as much oil and natural gas as at the start of the Ukraine war. That is thanks largely to a boom in trade with countries outside Europe and North America which have not imposed sanctions, most starkly with China. There are big lessons here for other parts of the world too; from Venezeula to Iran and Saudi Arabia, the rise of the BRICS means Western sanctions no longer have the unipolar ability to starve nations declared rogue by Washington. But the changing order brings new complexities: Russia’s balance of payments with China is in heavy deficit, and most of the increase in trade is in imports. That has caused a glut in Russian export facilities, once facilitating trade with Europe and now sitting unused, and this phenomenon takes tangible form in a pile up of containers, causing a plunge in their price affecting the global logistics market:

Russia currently has 150,000 excess shipping containers that rail depots are struggling to manage, reflecting a surge in Chinese goods flowing into the country but much less moving out.

Though Russia has endured sanctions from western economies since its invasion of Ukraine, the government in Moscow expects trade volume with China will top $200 billion this year, from $185 billion in 2022, Container xChange said.

The result: a collapse in the secondary market for containers in Moscow, which are going for less than half the price elsewhere in the world. The average price to buy a used 40-foot “high cube” container – those with a little more capacity than a regular 40-foot box – has plunged to $580 as of this week in the city, from $4,175 in February 2022.

For new containers, the price has fallen to $1,450 from $4,309 before Russia’s invasion of Ukraine, according to Container xChange’s data.

Source: Bloomberg

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Yan Pei-Ming, Aldo Moro, 1978. Here Ming depicts in epic form, and in almost the same red as his Mao, the Christian Democratic Italian Prime Minister of the centre-left, pursuing a Historic Compromise with the Communist Party when he was assassinated by the Red Brigades. Source: Dream Idea Machine

Yan Pei-Ming, 29 Aprile 1945, 2022. In a recent piece continuing his longstanding interest in Italy, Ming depicts the body of Benito Mussolini and his mistress Clara Petacci, executed at the end of World War II and hung upside-down in a service station in a square in suburban Milan for locals to see, a symbol of lost power. Source: Palazzo Strozzi

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Yan Pei-Ming, Vladimir Putin, Tsar of The New Russia, 2008. This is part of a tryptich of Putins including one in a lighter red than Ming’s Maos. Source: James Magazine

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