It’s stunning, but given the state of America’s 401(k)s, it’s not terribly surprising.
On March 31, 2016, Joe Pinsker writes in The Atlantic:
Sometimes, there is a single bonkers statistic that encapsulates a troubling—but abstract—truth about the financial world. One example is when The New York Timescalculated that there are fewer companies in the S&P 1500 run by women than there are companies run by men named John.
And now, courtesy of the Center for Effective Government, a nonprofit, and the Institute for Policy Studies, a think tank, here is another: Together, 100 American CEOs have more saved up for retirement than 41 percent of American families combined.
The CEO with the largest nest egg on the report’s list was David C. Novak, the former chief of Yum Brands (which owns KFC, Pizza Hut, and Taco Bell), and now its executive chairman. At last count, Novak had nearly $250 million in his retirement account, according to the report, which got its data on CEOs from companies’ SEC filings.
For the purposes of comparison, the average Yum employee had about $70,000 in his or her 401(k). That means the Novak’s retirement savings are more than 3,330 times the size of the typical Yum employee’s, which makes the ratio of average CEO pay to average worker pay—300:1—look relatively small.
The report, in a way, obscures the crisis at hand. The comparison it’s making—between 100 exceedingly well-paid executives and tens of millions of Americans—suggests intolerable corporate excess. As the report makes clear, on the CEO side of the equation, there are beefy retirement accounts flush with more than $4.5 billion. But on the typical-American side of the equation, there are a huge number of people who have practically nothing saved up—for all American households nearing retirement age, the median retirement-account balance isabout $12,000. So, it’s not so much that these CEOs have a lot (they do) but that everyone else has next to nothing.
With that in mind, the fact that 100 CEOs have saved up more than 41 percent of Americans is stunning but not surprising. Over the last few decades, companies have moved away from providing their workers with pensions, which used to offer a degree of security in retirement. But during that transition, pensions weren’t reliably replaced with retirement-savings accounts, such that now only about 40 percent of private-sector American workers have any kind of employer-provided or subsidized retirement plan, such as a pension or a 401(k). Everyone else is on their own.
CEOs can afford to save because their earnings far exceed the earnings necessary to meet a generally affluent lifestyle. Thus, they are able to reframe, unlike the vast majority of Americans, from consuming ALL of their earnings, which in large part are due to stock OWNERSHIP in the companies that employ them. Capital OWNERSHIP is the core reason that people become wealthy and remain wealthy throughout their life.
But the vast majority of Americans are not capital OWNERS and are solely dependent on wages, which increasingly are under competitive pressure due to globalization and bad trade deals, which are eliminating good-paying jobs in the United States and devaluing the worth of labor. And because the financial monetary system requires “past savings” to gain capital OWNERSHIP stakes in America’s profitable, stable, and growth corporations, there is no way that they can deny enough consumption to save and invest.
Though millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners. Pew Research found that 53 percent of Americans own no stock at all, and out of the 47 percent who do, the richest 5 percent own two-thirds of that stock. And only 10 percent of Americans have pensions, so stock market gains or losses don’t affect the incomes of most retirees.
By supporting the passage of the proposed Capital Homestead Act the nation can return to an asset-backed money system that can be used to generate through local commercial banks and the 12 regional Fed Reserve offices interest-free an equal allotment of capital credit to a Capital Homestead Account for each child, woman and man. This would equalize personal access to the means to acquire full-dividend payout shares issued by enterprises to finance sustainable growth in the economy or transfers of existing fulldividend payout shares. The credit would be repaid by “future savings” in the form of future pretax dividends. Reinforced by a radically new tax system and inheritance laws, America could begin closing the wealth gap between the top 0.1 percent and the bottom 90 percent and promote true economic democracy as the means of promoting effective political and social democracy. This new financing approach would no longer need the past accumulations of the rich, other savers or government financing. We would become the first economically classless society since our ancestors stepped out of the caves.
For more in-depth reading see my articles “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.org/11/economic-justice/ and “A Solution To Eroding Retirement Security” at http://www.huffingtonpost.com/gary-reber/a-solution-to-eroding-retirement_b_4103834.html and at http://www.nationofchange.org/solution-eroding-retirement-security-1382020223.
