The Consensus Is Universal: CEOs Get Paid Too Much

In a paper titled "How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay" to be published in Perspectives on Psychological Science, Sorapop Kiatpongsan (Chulalongkorn University) and Michael Norton (Harvard Business School) examine people's perceptions of income inequality.  More specifically, the authors compare what people think the pay ratio for CEOs to unskilled workers is, to what they think it should be, and to what it actually is.

The data are from the International Social Survey Programme (ISSP) from December 2012.  The sample includes respondents from 40 countries.

Kiatpongsan and Norton found that on average, people estimate that the pay ratio for CEOs to unskilled workers is about 10 to 1.  The ideal pay ratio, according to them, would be 4.6 to 1.  Both are far below real pay ratios.  In the U.S., for instance, the real pay ratio is 350 to 1.  Although not all countries agree on estimated and ideal pay ratios ("people in Denmark, for example, estimated the ratio to be 3.7 to 1, with an ideal ratio being 2 to 1. In South Korea, the estimated gap was much larger at 41.7 to 1. The ideal gap in Taiwan was particularly high, at 20 to 1"), the consensus, regardless of nationality or set of beliefs, is that CEOs get paid too much.




When it comes to other beliefs -- ranging from the importance of working hard or having a lot of job responsibility -- differences among people didn't result in major shifts in how much CEOs should get paid, either. 
"My coauthor and I were most surprised by the extraordinary consensus across the many different countries in the survey," Norton says. "Despite enormous differences in culture, income, religion, and other factors, respondents in every country surveyed showed a universal desire for smaller gaps in pay between the rich and poor than the current level in their countries. [...] Many of the heated debates about whether CEO pay should be capped or the minimum wage increased are debates based on an extreme lack of knowledge about the true state of affairs. In other words, both liberals and conservatives fail to accurately estimate the actual current gaps in our pay. Our hope is that presenting the data to all sides might force people to examine their assumptions about whether some people are making more than they would like, and others less."
Read more:
http://www.huffingtonpost.com/gretchen-gavett/ceos-get-paid-too-much-ac_b_5874884.html
http://www.hbs.edu/faculty/Publication%20Files/Kiatpongsan%20Norton%20PPS_31f17547-5033-401c-8ed2-ccc9b6a2b433.pdf

TeachingwithData.org resources:
Wealth Inequality in America (http://www.teachingwithdata.org/resource/3922)
Social Class and Attitudes about Inequality: A Data-Driven Learning Guide (http://www.teachingwithdata.org/resource/3459)
Income Inequality in the U.S. (http://www.teachingwithdata.org/resource/3182)
Income Differences (http://www.teachingwithdata.org/resource/3113)
An Analysis of Earnings (http://www.teachingwithdata.org/resource/3159)
NYT Interactive: What Percent Are You? (http://www.teachingwithdata.org/resource/3913)
Frederique Laubepin

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