Would you rather work for Apple?

 

Apple Corp. Headquarters

The common wisdom in American political debate is that CEOs make hundreds of times more than their workers --  331 times according to the AFL-CIO ($11.7 million for the CEO vs. $35,293 for the average worker). And that this inequality is due to evil, greedy, capitalist CEOs being awarded outsized compensation packages by their cronies on boards of directors.

But there are a couple of things going on here which may require a re-think.

There is one small issue with the $11.7 million comparison. One must cherry-pick the CEOs to get such enormous earnings (the AFL-CIO selected the 350 most highly paid CEOs to get this number). If we use Bureau of Labor Statistics data for all firms, the average earnings of all CEOs (approx. 250,000 of them) is about $175,000. This is a ratio of roughly five times the average worker, a number that more closely tracks the truth of mid-sized manufacturing firms and plumbing supply businesses and the majority of Americans.

But there has indisputably been a growing inequity in wages of the middle class vs. the top one percent. Comparing the thirty year period from 1982 to 2012, we see the middle of the income distribution increase by 20 percent. But in the same period, the top one percent of workers saw their incomes rise by 94 percent.

Many attribute this growing divide to the growth of CEO and executive compensation.

But in a recent study, “Firming Up Inequality,” four economists from the University of Minnesota, Stanford University, and the Social Security Administration offer an explanation that is breathtaking in its simplicity.

The mistake we are making, they say, is to compare CEO pay to all American workers. Instead, they suggest comparing CEO pay only to the firm that each CEO heads. For instance, the income of Craig Manear, CEO of Home Depot, should be compared only to Home Depot workers. And the compensation of Tim Cook, CEO of Apple, contrasted only with his Apple colleagues.

Working from a Social Security Administration dataset, they were able to track the total compensation of all workers, and, more importantly, tie them to the companies for whom they toiled.

Contrary to the common assertion of growing inequality, the authors state that “we find strong evidence that within-firm pay inequality has remained mostly flat over the past three decades.”

Mostly flat? How to explain this?

First, the study does recognize that inequality has increased (20 percent vs. 94 percent income growth as stated earlier). But they show that this disparity occurs between companies, not between all executives versus all workers.

Here is an example. Say it is the year 1920. You work for a struggling buggy manufacturer while your brother is employed by a burgeoning Ford Motor Company. He makes more than you do.

Ford is taking the transportation market by storm and buggies are quickly becoming a curiosity. The average earnings of all employees at Ford is greater than those at your buggy company because Ford is making massive profits. A new technology is driving an increase in wage inequality, not between CEOs and workers, but between Ford workers and buggy makers.

In our current era, the past 30 years have seen an enormous growth in high technology firms. There is a new, information  economy and an old economy. Information economy firms, in aggregate, are growing rapidly and generating lots of profit. Old economy firms are plodding along, growth and profits humble. Compensation at the new economy firms is much greater than at the old economy firms. The average Apple employee makes much more than the average Pep Boys worker, especially when considering stock options. And this gap has been growing for three decades.

In this coming political season, which will be rife with populist cries for income equality, keep one simple question in mind.

In order to achieve it, would you be willing to give up your iPhone and say goodbye to Google?

Dreams of Summer Long-ago

In mid-June it’s hard to remember that it’s still spring. Summer doesn’t start this year until June 21^st, the longest day of the year in the Northern hemisphere. On that day, the sun will rise in Attleboro at 5:11 a.m. and set at 8:24 p.m. giving us over fifteen hours of daylight. Six hundred miles to the west, yet in the same time zone, sunset will not occur until 9:00 p.m. Those were the long days we remember, we who grew up in the country.

School out, hay tall in the meadows and ready soon for the second cutting, fragrant with alfalfa, clover, and orchard grass. These forage crops grew lushly, soaking up sunlight for the coming winter. An ancient method of storing solar energy, the hay was harvested, dried, and stowed against the cattle’s need for sustenance in the coming short, dark, frigid, barren days of winter.

It seemed that all of our efforts were directed to preparing for winter. Corn planted, to be stored in silos. Loft filled with the aforementioned hay. Orchards in bloom, with apples and pears and cherries to come. Gardens, planted only scant weeks before, already greening with tomatoes and greens, potatoes and squash, and, our favorite, watermelon.

All this bounty to be harvested, processed, and kept in some way before the frosts came. Potatoes, carrots, and apples into the root cellar. Tomatoes, beans, and corn canned, promising savory soups to come. A lot of labor – tilling, planting, weeding, harvesting, and preserving. But the payoff was in delicious, healthy meals, even in the dark of deep winter.

But it wasn’t all work. The neighboring farm contained a large pond, ideal for a squealing bunch of kids to swim and picnic and fish and snooze upon its sunny banks. A grove of young but supple maple trees, 2-3” in diameter, provided additional entertainment. Shinny up ten or twelve feet, then begin to lean to and fro. The tree would sway and then gently droop, lowering the grinning child to the ground, and rebound when released, no worse for the wear. Luckily in those days, lawsuits were not filed at the drop of a hat, so we were welcomed on the neighboring farms.

Further fun was to be had from our old balloon-tire, single-speed bikes, which, after laboriously pedaled up the steep dirt-road hills, careened joyously down the other side, spewing gravel as we descended. Braking was optional, laughter was loud, knees sometimes skinned. It was the best entertainment that could be had (short of riding the spunky horses that the city folks boarded with us). Yes, summer in the country entailed hard work, but offered many offsetting rewards.

We learned to be self-sufficient, but learned, too, lessons of community. When a neighbor was gored by his bull, our dad milked his cows and cleaned the stalls for many weeks. Dairy cows don’t accept any excuses – they must be milked twice a day, every day. This simple act of generosity was repaid in many ways, none the least of which was a tow up the hill during “mud season,” when our car sank to its frame, and only the neighbor’s John Deere Model A had the moxie and ground clearance to yank us out of the mud.

The world is so much more complicated now. Entertainment is everywhere, always on, always demanding our attention. Twitter and Facebook and Instagram compete for our time. Our smartphones ding and ping and chime to draw our attention. The cable news networks are all ALERT ALERT ALERT, all of the time. Everything is breaking news, demanding our concern, our empathy, our energy. It is so draining.

Perhaps it’s time, this summer, to return to the old ways. Even for a single day, a single hour, disconnect, drop out, and find a fragrant hay field in which to regard clouds floating in the blue sky, and nap. Perchance to dream.