Compensation is a frequently discussed topic in the U.S., and many of these discussions revolve around the highly-debated disparity of pay between CEOs and the rest of the country.
CEO compensation has grown considerably in the last several decades – estimated at a rate of 940% since 1978. Some of the top-paid CEOs in the U.S. are household names like Elon Musk, Tim Cook, and Mark Zuckerburg.
CEOs take on huge responsibilities for their companies, so it makes sense that they’d be compensated accordingly, but where the issue lies for many is how their annual salaries compare to other workers in the U.S.
As we’re interested in staying informed on all aspects of the finance industry, whether they are directly related to commodities or not, we decided to explore exactly what the pay gap between CEOs and average workers looks like in the U.S. and, additionally, how the gap compares state to state.
Methodology
We relied on data from the U.S. Bureau of Labor Statistics (BLS) to find the difference in annual pay between CEOs and average workers in each state. The BLS provides annual wage estimates based on data collected from employers across all industries in every state.
The average worker pay estimate is found by taking the average salary of all non-farm occupations within each state, and the CEO pay estimate is found by averaging together the annual salary of Chief Executive Officers in each state.
Note: data from self-employed individuals is not included in the estimates and data was not available for Delaware and New Mexico.
Read on to learn more about what the pay disparity looks like in each state.
Contents
The Gap in Pay Between Average Workers and CEOs
In general, we found that in the U.S., CEOs earn an average of $139,782 more annually than the average worker. 28 states fall above that average and 21 states fall below.
The amount of the pay gap varies significantly state to state. The largest pay gap, $210,150, is in South Dakota and the smallest pay gap is in Idaho at $50,900, so there’s quite a large range of disparities across the country.
As a different way to look at the data, we also calculated what these dollar differences equate to in percentages. Starting with the national average, there is a 279.7% difference in pay between CEOs and average workers.
19 states have a gap in pay between CEOs and average workers of 300% or greater, with the greatest percentage difference being 502.8% in South Dakota.
The States with the Largest Gaps in Pay Between CEOs and Average Workers
Next, we wanted to highlight the states with the largest difference in annual pay between CEOs and average workers.
The South is the most represented region in the top 10, with Louisiana, Texas, Alabama, Georgia, and North Carolina making the list. The remaining states in the top 10 are not geographically concentrated in a particular region.
Interestingly, despite being home to Silicon Valley and many booming tech companies in the U.S., California was not among the 20 states with the largest gaps in pay between the two occupation groups. California ranked #21 on the list.
The States with the Smallest Gaps in Pay Between CEOs and Average Workers
Moving on to the states with the smallest gaps in annual pay, 3 of the top 10 states fall in the West region and include Idaho, Wyoming, and Montana. Idaho had the smallest percentage gap in pay at 117.3%.
Conclusion
While we’ve always been aware that there was a pay difference between CEOs and the rest of the country, it’s staggering to see the dollar and percentage differences laid out state by state.
With all of the changes and uncertainty the economy has seen and will continue to see as a result of the COVID-19 pandemic, it will be interesting to see how this potentially impacts executive pay at affected companies.
