In nine years of doing this column I've managed to mostly avoid writing about executive compensation, at least anything that required me to closely read a proxy statement.
One year my CEO pay column was about a drive to Nerstrand in southern Minnesota, to the childhood home of the economist and social critic Thorstein Veblen, to think through how Veblen's concept of "conspicuous consumption" might help us understand why CEOs get paid so much.
Another year, I focused on some academic papers that tried to explain runaway executive pay. The authors of the most convincing paper concluded that it was mostly the collapse of post-World War II social norms in business that did it, as self-restraint fell away and it became just fine for executives to grab what they could.
What I've never written is that CEO compensation seems to get set in some approximation of a functioning labor market so that must mean the pay is fair.To paraphrase the legendary investor Charlie Munger, I'm trying really hard to not be stupid.
It's also true that CEO pay has become boring. No idea to rein it in has ever worked, so what's left to say?
What's far more interesting — and maybe even hopeful — is what might be happening to pay for hourly workers at the other end of the wage scale.
The news headlines certainly give the impression that lower-wage workers have had a pretty good bump in pay, reinforced by all those photographs of "help wanted" signs in restaurants.
"In my whole eight years here, it's been hard to find employees," said Karl Amlie, owner of the Express Employment Professionals operation in Forest Lake, an agency that works to fill assembly, warehousing and other jobs. "I can rattle off 20 different customers that have had to raise wages. It seems like it's accelerated this year."
The average wage across thousands of hourly workers in his system has jumped to almost $18 so far in 2021, up from $16.39 an hour in 2019.
Raises are showing up in the national numbers, too, as nonsupervisory retail worker pay was up more than 9% in June compared to the end of 2019, according to the U. S. Bureau of Labor Statistics. Average wages for nonsupervisory workers in leisure and hospitality increased almost 9% during that time.
That seems really clear: pay raises across the board. But the picture becomes cloudier because of big changes this past year in who was working.
As COVID-19 spread last spring, the people most likely to get furloughed or otherwise stop working were the lowest-paid workers. Average wages looked to be growing a lot last year, but what was happening is that the lowest-paid people were getting knocked out of the calculations.
As vaccines for the coronavirus rolled out and the economy heated up this year, there were worries that so many of the lowest-wage workers were coming back that average wages would actually start slipping.
Yet while the data might be noisy right now, the head of research at the Federal Reserve Bank of Minneapolis, Mark Wright, said last week he's confident wages for hourly workers really are growing.
For evidence he's looked at something called the wage growth tracker published by the Federal Reserve Bank of Atlanta, which slices data in ways that reveal a little more about what might be happening.
"The people they call the first quartile, with the lowest wages, they've actually had higher wage growth than everybody else now for about the last three years, and you could almost say that's true going back six years," Wright said. "It was slightly higher in 2015, got quite a bit higher in 2017, got even higher in 2019."
"It's narrowed during the coronavirus times, but that also could be affected by the composition [of the averages]," he said, referring to that phenomenon of lowest-wage workers moving out of the labor market.
Prior to the pandemic, higher wages are exactly what you would have expected. The economy consistently added jobs once the recovery began in earnest after the Great Recession of the 2000s. Employers began complaining about the difficulty of hiring years before the pandemic finally ended the record-breaking, 113-month streak of monthly jobs gains.
It's long been known that wages are "sticky," meaning employers will rarely cut wages in a downturn and instead cut jobs. But they can also be sticky on the upside, with employers stubbornly resisting wage increases even as jobs go unfilled.
Wright's boss, Minneapolis Fed President Neel Kashkari, often reminded employers in the region that they couldn't complain of a labor shortage until they'd first tried boosting pay.
As for what's going to happen to hourly worker wages for the remainder of 2021, well, maybe only the most daring analyst should offer a forecast.
Higher wages should attract people back from the sidelines who decided during the pandemic that they were retired, not unemployed. If enough come back, that might loosen up the job market and dampen wage growth.
The same may happen with full hours for child-care centers and open elementary schools, as more parents come back into the job market, too.
As Wright pointed out, though, low-wage workers are more likely to not be fully paid for their work, a practice called wage theft. They are more likely to be sexually harassed on the job. And they do front-line work with an infectious disease pandemic still far from over.
It might take higher pay and better working conditions to entice people back to the kind of jobs they were willing to do in 2019. Wright added that some states have sharply cut back on employment insurance benefits, "and they are not seeing a massive return to work yet."
It would be a sign of progress if wages of hourly workers started growing faster than the pay of the corporate CEOs, and the evidence for that is awfully thin right now.
Minneapolis-based Target Corp. boosted its starting front-line pay during the pandemic to at least $15 an hour, in line with what other big employers have been doing. It's important to note, though, that $15 won't be quite enough to live on for a single person without any kids here in the Twin Cities, based upon our state's cost-of-living analysis.
But at least hourly pay at Target must be going in the right direction, as the median pay companywide increased more than 6% in the last fiscal year to $24,535, including Target's many part-timers. That's one of the two numbers used to calculate the CEO pay ratio disclosed in the proxy statement that compares CEO pay with what the rank-and-file make.
That was a little better raise percentage-wise than what CEO Brian Cornell got, up 4.3% to $19.8 million based on the methodology corporations use to disclose executive compensation.That means the CEO pay ratio at Target actually declined a bit, as Cornell's compensation slipped back to just 805 times the Target median pay.
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