Wall Street may be giddy over the booming economy and the stock market topping 11,000, but the fiscal euphoria isnt being felt on Main Street, according to United for a Fair Economy (UFE), a Boston-based economic think tank.
In a recently released study, Shifting Fortunes: The Perils of the Growing American Wealth Gap, the group reports that most American households have a lower net worth than they did in 1983, when the Dow was only at 1,000. In fact, average workers now earn less, adjusting for inflation, than they did when Richard Nixon was president, according to the report.
"The boom economy is a bust for most Americans," says Chuck Collins, UFE co-executive director, "and the prosperity is not being widely shared."
The UFE study points to the gap between worker salaries and compensation paid to chief executive officers (CEOs) as proof of a growing inequality of wealth.
"As recently as 1980, the ratio between CEO pay and average blue collar wages was 42-to-1. In 1997, it was 326-to-1, and in 1998 it rose to 419-to-1," reports Collins, who grew up in Michigan and worked in area auto plants. He asks, "How much is enough?"
Salaries for bigwigs such as Disneys Michael Eisner, rewarded with more than a half-billion dollars last year, or Citigroups Sanford Weill, who brought home $167 million, overshadow most Michigan CEOs, whose compensation was still substantial. GMs J.F. Smith is the states top earner at almost $5 million last year, with Kelloggs A.G. Langbo coming in with almost as much.
UFE is backing legislation that would disallow CEO salaries in excess of a certain ratio to be deducted from a firms tax burden.
Joseph Overton, senior vice president of the Mackinac Center for Public Policy, a Midland-based free market research institute, agrees a wage gap exists, but thinks the UFE proposal is a "back door way to fix CEO wages.
"No government official or the UFE can figure out what a fair price is for a CEO or a performer or a sports star," says Overton.
UFEs Collins thinks it can. "We dont subscribe to the great man theory of shareholder value, the notion that a CEO creates wealth alone," he asserts. "Workers, consumers and communities contribute to this wealth."
The Shifting Fortunes report is available from UFE at 37 Temple Place, 2nd Floor, Boston, MA 02111; or on the Web at www.stw.org.