In his thought-provoking March 25 column ("What's wrong with a little class warfare?") Dan Rodricks quoted a recent Economic Policy Institute report as stating that "The ratio of CEO compensation to average worker pay rose from 24:1 in 1965 to 262:1 in 2005." This rapidly swelling pay divide certainly raises some serious concerns.
In the first place, pay disproportions of this magnitude may serve to undermine worker morale and motivation and thereby further America's already growing decline in world competitiveness. In addition, the unethical nature of pay inequity at this scale could undermine employees' communal sense of obligation and duty -- why should workers push themselves to high standards for, say, $15 to $25 dollars per hour while watching their companies' CEOs and other senior managers compensate themselves at as much as $5,000 in that same hour?
Finally, since in many cases these senior executives have also been the ones who enact the layoffs of millions of American workers, this compensation unfairness spreads damage far beyond the walls of the individual firms involved. Layoffs create a double taxpayer burden, since laid off workers are no longer able to contribute to, and must now be supported by, the tax base. Such tax base reductions are usually followed by community erosion from cuts in police, fire, public education and other vital services. Thus the question arises whether these executives are increasing their corporate profits -- and their own paychecks -- at the expense of not just their own employees but also of all working taxpayers.