Category News

Glimmer of Hope in Jobs Report

Danny Vinik Leave a comment

After a few days off last week, I’m late to the party on the June jobs report. The report was bland as expected, with no change in the unemployment rate. The economy added 80,000 jobs in the month, not enough to keep up with population growth and certainly not enough to get back to full employment anytime soon. Hopefully, it will finally force the Fed to announce QE3 or a higher inflation target.

However, there was one small nugget in the report that was positive: Wages are rising

Not just wages, but the average work week also increased in June. As Sarah Kliff noted:

Working a few more hours at a slightly higher wage, means workers see a growing paycheck. They might have more bargaining power to demand a higher salary, too.

The fact that wages have been consistently ticking upwards demonstrates that workers have seen higher salaries. This is a good sign. Companies are going to slightly increase wages and their employees’ hours before hiring new employees. While the recovery is slow, firms do not need to rehire workers, but over time, simply increasing wages and hours will not be enough. The economy is not at that point yet, but it is at least on its way.

Of course, the jobs numbers have shown this nearly every month so I’m just focusing on it now, because the rest of the job numbers were so bleak.

Executive Pay Grows Yet Again

Danny Vinik 1 Comment

David E. Simon, CEO Simon Property Group

The top CEOs around the country saw their median pay grow to $14.5 million last year, even as stockholders began demonstrating their displeasure. The Dodd-Frank bill requires companies to hold a vote regarding executive pay at least once every six years. Many companies did so last year and stockholders voiced their displeasure. For instance, 73.3 percent of shareholders of Simon Property Group voted against the pay of its top executive, David Simon. Here’s the issue, though. The vote is non-binding. Companies have to take into account the stockholders’ vote, but they do not need to listen to it. Thus, Simon received $137 million last year, though a large chunk of it was in a stock package.

In many ways, CEO pay has fallen into a downward spiral. Companies are not just competing with each other for a limited supply of top-level executives, but they are competing with each other to pay those top-level executives the most. Many companies have begun using CEO pay as a form of prestige. A small company paying an outlandish amount for its top-level executives views itself as a more influential and important company than one of a similar size who pays just an average amount for its executives.

Each year companies pay their CEOs more, increasing their pay much more than the average worker and higher than inflation. Then the following year, in order to keep up with other companies, they raise their top-executive pay even more. Each year, the raises the executives receive outpace the raises that ordinary workers receive, f they happen. This just further increases income inequality. Do all CEOs really deserve a raise each year that is twice as a great in percentage terms as the ordinary worker? What if the company loses money? Can anyone really believe that CEOs deserve a raise then? But it happens and the American public has been rightfully outraged about it for year. Unfortunately, while Dodd-Frank at least gave stockholders the ability to vote on the issue, it didn’t give them any actual power. Thus, top-level executives continue to see their pay rise while the rest of America grumbles to itself.

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