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The biggest reason America’s rich keep getting richer (and you’re not)

MarketWatch logo MarketWatch 8/17/2018 Kari Paul
a man wearing a suit and tie sitting in a car: CEOs are getting richer.© Provided by Dow Jones & Company, Inc. CEOs are getting richer.

Your boss likely had a good year in 2017, even if you did not.

Executives saw a huge surge in compensation in the past year, according to a study released Thursday by the non-profit think tank the Economic Policy Institute. The average chief executive officer at the 350 largest firms in the U.S. received $18.9 million in compensation in 2017, a 17.6% increase over 2016. Meanwhile, the typical worker’s compensation remained flat, rising a mere 0.3%.

The gap between executives and the average worker has been widening for decades, the study found. The CEO-to-worker compensation ratio in 2017 was 312-to-1, a huge jump from just 20-to-1 in 1965. In 2016, Wall Street executives saw bonuses jump 10% and pay increase as much as 20% according to a study released last year by compensation firm Johnsons Associates Inc.

This is not the highest compensation ever for executives, though: The average CEO compensation peaked in 2000 at the height of the stock bubble at $21 million — 344 times the pay of the typical worker.

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Still, in the nine years since the end of the Great Recession, an unusually high percentage of Americans (14%) are still not seeing pay raises. The federal minimum wage is $7.25 an hour and hasn’t increased since 2009, although some states and municipalities enacted laws to raise the wage this year.

Salary increases in 2018 are at 2.8%, according to another study released Thursday by professional services firm Mercer, no change from 2017. The majority of firms it works with are expressing concerns about retaining workers.

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This rise in inequality has fueled an ongoing tension between the “haves and the have-nots,” said Mark Hamrick, senior economic analyst and Washington bureau chief at finance site BankRate.com.

“There’s no group which has more than the top 1%, including CEOs of the largest publicly-traded companies,” he said. “When the income ratio is more than 300-to-1, that also tells you how many years a typical worker would have to toil with an income to make just as much as a typical corporate chieftain.”

In 2016, there were eight CEOs with pay packages exceeding $30 million. Meanwhile, America’s Middle class has been shrinking and lost 30% of its wealth over the last four decades, according to another 2015 study.

CEOs made this much more than their average workers | Video by CBS

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