Do Rich People Work Harder Than You?

A new report on rising CEO pay raises questions about pay inequality and the nature of work

Jun 8, 2014 at 11:46AM

Money

Just last month, PayScale revealed the pay bestowed upon the CEOs of 100 publicly held companies -- right alongside the median pay for the average worker at each specific company.

It's a real eye-opener. For example, the CEO of Boeing makes nearly 200 times the average company worker salary, and CVS Caremark's chief makes an astounding 422 times what a typical employee takes home. The only companies whose top brass made less did so because the CEOs receive a token $1 salary per year.

As PayScale points out, however, there is more to compensation than wages, particularly for corporate executives – perks such as stock options, retirement plans and other benefits, which were not counted in the site's analysis. 

Deserving, or just plain lucky?
Overall, the ratio of what corporate CEOs were paid in 2013 to the earnings of the average worker was an astonishing 331:1, according to the AFL-CIO. When the big guys were compared to minimum wage workers, that ratio skyrocketed to 774:1.

Reports like these tend to make the issue of income inequality more personal. What worker doesn't feel insulted when the extravagant pay levels of the corner office crowd are compared to their own, more measly salaries?

How can these compensation packages be justified – especially when these companies have stockholders to whom they must answer? Theories abound, and a recent article on NBC News offers a few reasons: boards of directors want to pay their executives similarly to other industries; the nerve-wracking effects of increased scrutiny must be salved with more money; and, of course, the biggie – they get lots and lots of company stock. 

The simple answer, according to some, is that these guys just work harder.

Bootstrap theory in action
Those holding that opinion are the super-rich, of course, but it is a popular viewpoint. In May, CNBC polled over 500 millionaires, and the results were interesting.

Although many were disturbed by the increasing gap between rich and poor – and advocated raising the minimum wage and taxes on the rich to resolve it – most said they were very wealthy due to their own hard work. They also think that everyone else can attain that status, if they work hard enough. 

Specific super-rich people have voiced the same opinion. This past winter, venture capitalist Tom Perkins suggested that liberals piling on the wealthiest 1% were akin to Nazis. Later, the chair of Equity Group Investments, a billionaire himself, agreed with Perkins' point of view – if not the questionable comparison.

More recently, the chair and CEO of American Realty Capital Properties was in the news because of a fantastic performance plan in place at the real estate investment trust that may bestow over $90 million on the top exec over the next five years. Despite the outsized payouts, CEO Nicholas Schorsch described the pool as "appropriate", noting that he earns the big money he is paid, and works so hard that he only "sleep(s) four hours a night".

Unfortunately, hard work doesn't always net high pay
Certainly, chief executives work long hours and are savvy business people. But other jobs are just as difficult, more dangerous, and require unparalleled intelligence. How do they stack up?

Firefighters, for example, have undoubtedly one of the most hazardous jobs, and require special training, though not necessarily a college degree. According to the Bureau of Labor Statistics, firefighters often work more than 40 hours per week – all for a median annual pay rate of slightly more than $45,000. 

For one of the brainiest occupations known to humankind – rocket scientist – applicants can expect a salary of $101,000 according to SimplyHired.com, or $111,500 if you check the salaries reported on Glassdoor.com. NASA, on the other hand, recently advertised an Aerospace Engineer position that pays between $108,778 and $141,406 per year – a far cry from even the lowest CEO pay on the PayScale list. 

The point is, of course, that hard work -- or the value of that work – does not always translate into a big payday. CEOs make lots of money because it is expected that they will, and the quality of the work rendered isn't always a consideration. Meanwhile, most other workers are losing ground.

Will a higher minimum wage help? Probably, and even millionaires support the increase. So far, however, that issue appears stalled at the national level, even as the highest-paid among us log increases in pay every year since 2010. It's a tough job – but somebody has to do it.

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Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends CVS Caremark. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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