Elon Musk and Jeff Bezos want to colonize outer space to save humanity, but they couldn’t care less about protecting the rights of workers here on earth.

Musk’s SpaceX just won a $2.9 billion NASA contract to land astronauts on the moon, beating out Bezos.

The money isn’t a big deal for either of them. Musk is worth $179.7 billion. Bezos, $197.8 billion. Together, that’s almost as much as the bottom 40 percent of Americans combined.

And the moon is only their stepping-stone.

Musk says SpaceX will land humans on Mars by 2026 and wants to establish a colony by 2050. Its purpose, he says, will be to ensure the continued survival of our species.

“If we make life multiplanetary, there may come a day when some plants and animals die out on Earth but are still alive on Mars,” he tweeted.

Bezos is also aiming to build extraterrestrial colonies, but in space rather than on Mars. He envisions “very large structures, miles on end” that will “hold a million people or more each.”

But Musk and Bezos are treating their workers like, well, dirt.

Last spring, after calling government stay-at-home orders “fascist” and tweeting “FREE AMERICA NOW,” Musk reopened his Tesla factory in Fremont, California before health officials said it safe to do so. Almost immediately, 10 Tesla workers came down with the virus. As cases mounted, Musk fired workers who took unpaid leave. Seven months later, at least 450 Tesla workers had been infected.

Musk’s production assistants, as they’re called, earn $19 an hour – hardly enough to afford rent and other costs of living in northern California. Musk is virulently anti-union. A few weeks ago, the National Labor Relations Board found that Tesla illegally interrogated workers over suspected efforts to form a union, fired one and disciplined another for union-related activities, threatened workers if they unionized and barred employees from communicating with the media.

Bezos isn’t treating his earthling employees much better. His warehouses impose strict production quotas and subject workers to seemingly arbitrary firings, total surveillance and 10-hour workdays with only two half-hour breaks – often not enough time to get to a bathroom and back. Bezos boasts that his workers get $15 an hour, but that comes to about $31,000 a year for a full-time worker, less than half the U.S. median family income. And no paid sick leave.

Bezos has fired at least two employees who publicly complained about lack of protective equipment during the pandemic. To thwart the recent union drive in Bessemer, Alabama, Amazon required workers to attend anti-union meetings, warned they’d have to pay union dues (untrue – Alabama is a “right-to-work” state), and threatened them with lost pay and benefits.

Musk and Bezos are the richest people in America and their companies are among the country’s fastest growing. They thereby exert huge influence on how other chief executives understand their obligations to employees.

The gap between the compensation of CEOs and average workers is already at a record high. They inhabit different worlds.

If Musk and Bezos achieve their extraterrestrial aims, these worlds could be literally different. Most workers won’t be able to escape into outer space. A few billionaires are already lining up.

The super-rich have always found means of escaping the perils of everyday life. During the plagues of the 17^thcentury, European aristocrats decamped to their country estates. During the 2020 pandemic, wealthy Americans headed to the Hamptons, their ranches in Wyoming or their yachts.

The rich have also found ways to protect themselves from the rest of humanity – in fortified castles, on hillsides safely above smoke and sewage, in grand mansions far from the madding crowds. Some of today’s super rich have created doomsday bunkers in case of nuclear war or social strife.

But as earthly hazards grow – not just environmental menaces but also social instability related to growing inequality – escape will become more difficult. Bunkers won’t suffice. Not even space colonies can be counted on.

I’m grateful to Musk for making electric cars and to Bezos for making it easy to order stuff online. But I wish they’d set better examples for protecting and lifting the people who do the work.  

It’s understandable that the super wealthy might wish to escape the gravitational pull of the rest of us. But there’s really no escape. If they’re serious about survival of the species, they need to act more responsibly toward working humans here on terra firma.

What can be done to deter pharmaceutical companies from jacking up prices of critical drugs? To prevent Wall Street banks from excessive gambling? To nudge CEOs into taking a longer-term view? To restrain runaway CEO pay?

Answer to all four: Fulfill Bill Clinton’s 1992 campaign pledge.

When he ran for president, Bill Clinton said he’d bar companies from deducting executive pay above $1 million. Once elected, he asked his economic advisors (among them, yours truly) to put the measure into his first budget.

My colleagues weren’t exactly enthusiastic about the new president’s campaign promise. “Maybe there’s some way we can do this without actually limiting executive pay,” one said.

“Look, we’re not limiting executive pay,” I argued. “Companies could still pay their executives whatever they wanted to pay them. We’re just saying society shouldn’t subsidize through the tax code any pay over a million bucks.”

They weren’t convinced.

“Why not require that pay over a million dollars be linked to company performance?” said another. “Executives have to receive it in shares of stock or stock options, that sort of thing. If no linkage, no deduction.”

“Good idea,” a third chimed in. “It’s consistent with what the President promised, and it won’t create flak in the business community.”

“But,” I objected, “we’re not just talking about shareholders. The pay gap is widening in this country, and it affects everybody.”

“Look, Bob,” said the first one. “We shouldn’t do social engineering through the tax code And there’s no reason to declare class warfare. I think we’ve arrived at a good compromise. I propose that we recommend it to the President.”

The vote was four to one. The measure became section 162(m) of the IRS tax code. It was supposed to cap executive pay. But it just shifted executive pay from salaries to stock options.

After that, not surprisingly, stock options soared – becoming by far the largest portion of CEO pay.

When Bill Clinton first proposed his plan, compensation for CEOs at America’s 350 largest corporations averaged $4.9 million. By the end of the Clinton administration, it had ballooned to $20.3 million. Since then, it’s gone into the stratosphere.

And because corporations can deduct all this from their corporate income taxes, you and I and other taxpayers have been subsidizing this growing bonanza.

Hillary Clinton understands this. “When you see that you’ve got CEO’s making 300 times what the average worker’s making you know the deck is stacked in favor of those at the top,” she’s said in her presidential campaign.

And she’s taken direct aim at executive stock options.

“Many stock-heavy pay packages have created a perverse incentive for executives to seek the big payouts that could come from a temporary rise in share price,” she said in July. “And we ended up encouraging some of the same short-term thinking we meant to discourage.”

Yes, we did. Specifically, her husband and his economic team did.

Case in point: In 2014, pharmaceutical company Mylan put in place a one-time stock grant worth as much as $82 million to the company’s top five executives if Mylan’s earnings and stock price met certain goals by the end of 2018.

But the executives would get nothing if the company – whose star product is the EpiPen allergy treatment – failed to meet the target. Almost immediately, Mylan began stepping up the pace of EpiPen price increases. The price of an EpiPen two-back doubled to $600 – a move Hillary Clinton has rightfully called “outrageous.”

Stock options doled out to Wall Street executives in the early 2000s didn’t exactly encourage good behavior, either. They contributed to the near meltdown of the Street and a taxpayer-funded bailout.

Now that Wall Street is no longer restrained by the terms of the bailout, it’s back issuing stock options with a vengeance.

According to a recent report from the Institute for Policy Studies, the top 20 banks paid their executives over $2 billion in performance bonuses between 2012 and 2015. That translates into a taxpayer subsidy of $1.7 million per executive per year.

Hillary Clinton has proposed penalizing pharmaceutical companies like Mylan that suddenly jack up the prices of crucial drugs. And she’s promised to go after big banks that make excessively risky bets.

These are useful steps. But she should also consider a more basic measure, which would better align executive incentives with what’s good for the public.

It’s doing what her husband pledged to do in 1992, if elected president – but which his economic advisors then sabotaged: Bar corporations from deducting all executive pay in excess of $1 million. Period.

The Securities and Exchange Commission approved a rule last week requiring that large publicly held corporations disclose the ratios of the pay of their top CEOs to the pay of their median workers.

About time.

For the last thirty years almost all incentives operating on American corporations have resulted in lower pay for average workers and higher pay for CEOs and other top executives.

Consider that in 1965, CEOs of America’s largest corporations were paid, on average, 20 times the pay of average workers. 

Now, the ratio is over 300 to 1.

Not only has CEO pay exploded, so has the pay of top executives just below them. 

The share of corporate income devoted to compensating the five highest-paid executives of large corporations ballooned from an average of 5 percent in 1993 to more than 15 percent by 2005 (the latest data available).

Corporations might otherwise have devoted this sizable sum to research and development, additional jobs, higher wages for average workers, or dividends to shareholders – who, not incidentally, are supposed to be the owners of the firm.

Corporate apologists say CEOs and other top executives are worth these amounts because their corporations have performed so well over the last three decades that CEOs are like star baseball players or movie stars.

Baloney. Most CEOs haven’t done anything special. The entire stock market surged over this time. 

Even if a company’s CEO simply played online solitaire for thirty years, the company’s stock would have ridden the wave.  

Besides, that stock market surge has had less to do with widespread economic gains than with changes in market rules favoring big companies and major banks over average employees, consumers, and taxpayers.

Consider, for example, the stronger and more extensive intellectual-property rights now enjoyed by major corporations, and the far weaker antitrust enforcement against them. 

Add in the rash of taxpayer-funded bailouts, taxpayer-funded subsidies, and bankruptcies favoring big banks and corporations over employees and small borrowers.

Not to mention trade agreements making it easier to outsource American jobs, and state legislation (cynically termed “right-to-work” laws) dramatically reducing the power of unions to bargain for higher wages.

The result has been higher stock prices but not higher living standards for most Americans.

Which doesn’t justify sky-high CEO pay unless you think some CEOs deserve it for their political prowess in wangling these legal changes through Congress and state legislatures.

It even turns out the higher the CEO pay, the worse the firm does.

Professors Michael J. Cooper of the University of Utah, Huseyin Gulen of Purdue University, and P. Raghavendra Rau of the University of Cambridge, recently found that companies with the highest-paid CEOs returned about 10 percent less to their shareholders than do their industry peers.

So why aren’t shareholders hollering about CEO pay? Because corporate law in the United States gives shareholders at most an advisory role.

They can holler all they want, but CEOs don’t have to listen. 

Larry Ellison, the CEO of Oracle, received a pay package in 2013 valued at $78.4 million, a sum so stunning that Oracle shareholders rejected it. That made no difference because Ellison controlled the board.

In Australia, by contrast, shareholders have the right to force an entire corporate board to stand for re-election if 25 percent or more of a company’s shareholders vote against a CEO pay plan two years in a row.

Which is why Australian CEOs are paid an average of only 70 times the pay of the typical Australian worker.

The new SEC rule requiring disclosure of pay ratios could help strengthen the hand of American shareholders.

The rule might generate other reforms as well – such as pegging corporate tax rates to those ratios.

Under a bill introduced in the California legislature last year, a company whose CEO earns only 25 times the pay of its typical worker would pay a corporate tax rate of only 7 percent, rather than the 8.8 percent rate now applied to all California firms.

On the other hand, a company whose CEO earns 200 times the pay of its typical employee, would face a 9.5 percent rate. If the CEO earned 400 times, the rate would be 13 percent.

The bill hasn’t made it through the legislature because business groups call it a “job killer.” 

The reality is the opposite. CEOs don’t create jobs. Their customers create jobs by buying more of what their companies have to sell.

So pushing companies to put less money into the hands of their CEOs and more into the hands of their average employees will create more jobs.

The SEC’s disclosure rule isn’t perfect. Some corporations could try to game it by contracting out their low-wage jobs. Some industries pay their typical workers higher wages than other industries.

But the rule marks an important start.

The Supreme Court’s recent blessing of Obamacare has precipitated a rush among the nation’s biggest health insurers to consolidate into two or three behemoths.

The result will be good for their shareholders and executives, but bad for the rest of us – who will pay through the nose for the health insurance we need.

We have another choice, but before I get to it let me give you some background.

Last week, Aetna announced it would spend $35 billion to buy rival Humana in a deal that will create the second-largest health insurer in the nation, with 33 million members.

The combination will claim a large share of the insurance market in many states – 88 percent in Kansas and 58 percent in Iowa, for example.

A week before Aetna’s announcement, Anthem disclosed its $47 billion offer for giant insurer Cigna. If the deal goes through, the combined firm will become the largest health insurer in America.

Meanwhile, middle-sized and small insurers are being gobbled up. Centene just announced a $6.3 billion deal to acquire Health Net. Earlier this year Anthem bought Simply Healthcare Holdings for $800 million.

Executives say these combinations will make their companies more efficient, allowing them to gain economies of scale and squeeze waste out of the system.

This is what big companies always say when they acquire rivals.

Their real purpose is to give the giant health insurers more bargaining leverage over employees, consumers, state regulators, and healthcare providers (which have also been consolidating).

The big health insurers have money to make these acquisitions because their Medicare businesses have been growing and Obamacare is bringing in hundreds of thousands of new customers. They’ve also been cutting payrolls and squeezing more work out of their employees.

This is also why their stock values have skyrocketed. A few months ago the Standard & Poor’s (S&P) 500 Managed Health Care Index hit its highest level in more than twenty years. Since 2010, the biggest for-profit insurers have outperformed the entire S&P 500.

Insurers are seeking rate hikes of 20 to 40 percent for next year because they think they already have enough economic and political clout to get them.

That’s not what they’re telling federal and state regulators, of course. They say rate increases are necessary because people enrolling in Obamacare are sicker than they expected, and they’re losing money.

Remember, this an industry with rising share values and wads of cash for mergers and acquisitions. 

It also has enough dough to bestow huge pay packages on its top executives. The CEOs of the five largest for-profit health insurance companies each raked in $10 to $15 million last year.

After the mergers, the biggest insurers will have even larger profits, higher share values, and fatter pay packages for their top brass.

There’s abundant evidence that when health insurers merge, premiums rise. For example, Leemore Dafny, a professor at the Kellogg School of Management at Northwestern University, and her two co-authors, found that after Aetna merged with Prudential HealthCare in 1999, premiums rose 7 percent higher than had the merger not occurred.

The problem isn’t Obamacare. The real problem is the current patchwork of state insurance regulations, insurance commissioners, and federal regulators can’t stop the tidal wave of mergers, or limit the economic and political power of the emerging giants.  

Which is why, ultimately, American will have to make a choice.

If we continue in the direction we’re headed we’ll soon have a health insurance system dominated by two or three mammoth for-profit corporations capable of squeezing employees and consumers for all they’re worth – and handing over the profits to their shareholders and executives.

The alternative is a government-run single payer system – such as is in place in almost every other advanced economy – dedicated to lower premiums and better care.

Which do you prefer?

A few years ago, hedge fund Level Global Investors made $54 million selling Dell Computer stock based on insider information from a Dell employee. When charged with illegal insider trading, Global Investors’ co-founder Anthony Chiasson claimed he didn’t know where the tip came from.

Chiasson argued that few traders on Wall Street ever know where the inside tips they use come from because confidential information is, in his words, the “coin of the realm in securities markets.”

Last week the United States Court of Appeals for the Second Circuit, which oversees federal prosecutions of Wall Street, agreed. It overturned Chiasson’s conviction, citing lack of evidence Chaisson received the tip directly, or knew insiders were leaking confidential information in exchange for some personal benefit.

The Securities and Exchange Act of 1934 banned insider trading but left it up to the Securities and Exchange Commission and the courts to define it. Which they have – in recent decades so narrowly that confidential information is indeed the coin of the realm.

If a CEO tells his golf buddy that his company is being taken over, and his buddy makes a killing on that information, no problem. If his buddy leaks the information to a hedge-fund manager like Chiasson, and doesn’t tell Chiasson where it comes from, Chiasson can also use the information to make a bundle.

Major players on Wall Street have been making tons of money not because they’re particularly clever but because they happen to be in the realm where a lot of coins come their way.

Last year, the top twenty-five hedge fund managers took home, on average, almost one billion dollars each. Even run-of-the-mill portfolio managers at large hedge funds averaged $2.2 million each.

Another person likely to be exonerated by the court’s ruling is Michael Steinberg, of the hedge fund SAC Capital Advisors, headed by Stephen A. Cohen.

In recent years several of Cohen’s lieutenants have been convicted of illegal insider trading. Last year Cohen himself had to pay a stiff penalty and close down SAC because of the charges, after making many billions. 

SAC managed so much money that it handed over large commissions to bankers on Wall Street. Those banks possessed lots of inside information of potential value to SAC Capital. This generated possibilities for lucrative deals.

According to a Bloomberg Businessweek story from 2003, SAC’s commissions “grease the super-powerful information machine that Cohen has built up” and “wins Cohen the clout that often makes him privy to trading and analyst information ahead of rivals.”

One analyst was quoted as saying “I call Stevie personally when I have any insight or news tidbit on a company. I know he’ll put the info to use and actually trade off it.” SAC’s credo, according to one of its former traders, was always to “get the information before anyone else.”

Insider trading has also become commonplace in corporate suites, which is one reason CEO pay has skyrocketed.

CEOs and other top executives, whose compensation includes piles of company stock, routinely use their own inside knowledge of when their companies will buy back large numbers of shares of stock from the public – thereby pumping up share prices – in order to time their own personal stock transactions.

That didn’t used to be legal. Until 1981, the Securities and Exchange Commission required companies to publicly disclose the amount and timing of their buybacks. But Ronald Reagan’s SEC removed these restrictions.

Then George W. Bush’s SEC allowed top executives, even though technically company “insiders” with knowledge of the timing of their company’s stock buybacks, to quietly cash in their stock options without public disclosure.

But now it’s normal practice. According to research by Professor William Lazonick of the University of Massachusetts, between 2003 and 2012 the chief executives of the ten companies that repurchased the most stock (totaling $859 billion) received 58 percent of their total pay in stock options or stock awards.

In other words, many CEOs are making vast fortunes not because they’re good at managing their corporations but because they’re good at using insider information. It’s the coin of their realm, too.

None of this would be a problem if the only goal were economic efficiency. The faster financial markets adjust to all available information, confidential or not, the more efficient they become.

But profiting off inside information that’s not available to average investors strikes many as unfair. The “coin of the realm” on Wall Street and in corporate boardrooms is contributing to the savage inequalities of American life.

If Congress and the Securities and Exchange Commission wanted to reverse this and remove one of the largest privileges of the realm, they could. But they won’t, because those who utilize those coins also have a great deal of political power.

For years Americans have assumed that our hard-charging capitalism  is better than the soft-hearted version found in Canada and Europe. American capitalism might be a bit crueler but it generates faster growth and higher living standards overall. Canada’s and Europe’s “welfare-state socialism” is doomed.  

It was a questionable assumption to begin with, relying to some extent on our collective amnesia about the first three decades after World War II, when tax rates on top incomes in the U.S. never fell below 70 percent, a larger portion of our economy was invested in education than before or since, over a third of our private-sector workers were unionized, we came up with Medicare for the elderly and Medicaid for the poor, and built the biggest infrastructure project in history, known as the interstate highway system.

But then came America’s big U-turn, when we deregulated, de-unionized, lowered taxes on the top, ended welfare, and stopped investing as much of the economy in education and infrastructure.

Meanwhile, Canada and Europe continued on as before. Soviet communism went bust, and many of us assumed European and Canadian “socialism” would as well.

That’s why recent data from the Luxembourg Income Study Database  is so shocking.

The fact is, we’re falling behind. While median per capita income in the United States has stagnated since 2000, it’s up significantly in Canada and Northern Europe. Their typical worker’s income is now higher than ours, and their disposable income – after taxes – higher still.

It’s difficult to make exact comparisons of income across national borders because real purchasing power is hard to measure. But even if we assume Canadians and the citizens of several European nations have simply drawn even with the American middle class, they’re doing better in many other ways.

Most of them get free health care and subsidized child care. And if they lose their jobs, they get far more generous unemployment benefits than we do. (In fact, right now 75 percent of jobless Americans lack any unemployment benefits.)

If you think we make up for it by working less and getting paid more on an hourly basis, think again. There, at least three weeks paid vacation as the norm, along with paid sick leave, and paid parental leave.

We’re working an average of 4.6 percent more hours more than the typical Canadian worker, 21 percent more than the typical French worker, and a whopping 28 percent more than your typical German worker, according to data compiled by New York Times columnist Nicholas Kristof.

But at least Americans are more satisfied, aren’t we? Not really. According to opinion surveys and interviews, Canadians and Northern Europeans are.

They also live longer, their rate of infant mortality is lower, and women in these countries are far less likely to die as result of complications in pregnancy or childbirth.

But at least we’re the land of more equal opportunity, right? Wrong. Their poor kids have a better chance of getting ahead. While 42 percent of American kids born into poor families remain poor through their adult lives, only 30 percent of Britain’s poor kids remain impoverished – and even smaller percentages in other rich countries.

Yes, the American economy continues to grow faster than the economies of Canada and Europe. But faster growth hasn’t translated into higher living standards for most Americans.

Almost all our economic gains have been going to the top – into corporate profits and the stock market (more than a third of whose value is owned by the richest 1 percent). And into executive pay (European CEOs take home far less than their American counterparts).

America’s rich also pay much lower taxes than do the rich in Canada and Europe.

But surely Europe can’t go on like this. You hear it all the time: They can no longer afford their welfare state.

That depends on what’s meant by “welfare state.” If high-quality education is included, we’d do well to emulate them. Americans between the ages of 16 and 24 rank near the bottom among rich countries in literacy and numeracy. That spells trouble for the U.S. economy in the future.

They’re also doing more workforce training, and doing it better, than we are. The result is more skilled workers.  

Universal health care is another part of their “welfare state” that saves them money because healthier workers are more productive.

So let’s put ideology aside. The practical choice isn’t between capitalism and “welfare-state socialism.” It’s between a system that’s working for a few at the top, or one that’s working for just about everyone. Which would you prefer?

Until the 1980s, corporate CEOs were paid, on average, 30 times what their typical worker was paid. Since then, CEO pay has skyrocketed to 280 times the pay of a typical worker; in big companies, to 354 times.

Meanwhile, over the same thirty-year time span the median American worker has seen no pay increase at all, adjusted for inflation. Even though the pay of male workers continues to outpace that of females, the typical male worker between the ages of 25 and 44 peaked in 1973 and has been dropping ever since. Since 2000, wages of the median male worker across all age brackets has dropped 10 percent, after inflation.

This growing divergence between CEO pay and that of the typical American worker isn’t just wildly unfair. It’s also bad for the economy. It means most workers these days lack the purchasing power to buy what the economy is capable of producing – contributing to the slowest recovery on record. Meanwhile, CEOs and other top executives use their fortunes to fuel speculative booms followed by busts.

Anyone who believes CEOs deserve this astronomical pay hasn’t been paying attention. The entire stock market has risen to record highs. Most CEOs have done little more than ride the wave.

There’s no easy answer for reversing this trend, but this week I’ll be testifying in favor of a bill introduced in the California legislature that at least creates the right incentives. Other states would do well to take a close look.

The proposed legislation, SB 1372, sets corporate taxes according to the ratio of CEO pay to the pay of the company’s typical worker. Corporations with low pay ratios get a tax break.Those with high ratios get a tax increase.

For example, if the CEO makes 100 times the median worker in the company, the company’s tax rate drops from the current 8.8 percent down to 8 percent. If the CEO makes 25 times the pay of the typical worker, the tax rate goes down to 7 percent.

On the other hand, corporations with big disparities face higher taxes. If the CEO makes 200 times the typical employee, the tax rate goes to 9.5 percent; 400 times, to 13 percent.

The California Chamber of Commerce has dubbed this bill a “job killer,” but the reality is the opposite. CEOs don’t create jobs.Their customers create jobs by buying more of what their companies have to sell – giving the companies cause to expand and hire.

So pushing companies to put less money into the hands of their CEOs and more into the hands of average employees creates more buying power among people who will buy, and therefore more jobs.

The other argument against the bill is it’s too complicated. Wrong again. The Dodd-Frank Act already requires companies to publish the ratios of CEO pay to the pay of the company’s median worker (the Securities and Exchange Commission is now weighing a proposal to implement this). So the California bill doesn’t require companies to do anything more than they’ll have to do under federal law. And the tax brackets in the bill are wide enough to make the computation easy.

What about CEO’s gaming the system? Can’t they simply eliminate low-paying jobs by subcontracting them to another company – thereby avoiding large pay disparities while keeping their own compensation in the stratosphere?

No. The proposed law controls for that. Corporations that begin subcontracting more of their low-paying jobs will have to pay a higher tax.  

For the last thirty years, almost all the incentives operating on companies have been to lower the pay of their workers while increasing the pay of their CEOs and other top executives. It’s about time some incentives were applied in the other direction.

The law isn’t perfect, but it’s a start. That the largest state in America is seriously considering it tells you something about how top heavy American business has become, and why it’s time to do something serious about it.

It’s often assumed that people are paid what they’re worth. According to this logic, minimum wage workers aren’t worth more than the $7.25 an hour they now receive. If they were worth more, they’d earn more. Any attempt to force employers to pay them more will only kill jobs. 

According to this same logic, CEOs of big companies are worth their giant compensation packages, now averaging 300 times pay of the typical American worker. They must be worth it or they wouldn’t be paid this much. Any attempt to limit their pay is fruitless because their pay will only take some other form. 

“Paid-what-you’re-worth” is a dangerous myth.  

Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour. 

Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets – mobile inventory controls, instant checkout devices, retail search engines – making him or her quite productive. 

The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.

Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom. 

By the same token, today’s CEOs don’t rake in 300 times the pay of average workers because they’re “worth” it. They get these humongous pay packages because they appoint the compensation committees on their boards that decide executive pay. Or their boards don’t want to be seen by investors as having hired a “second-string” CEO who’s paid less than the CEOs of their major competitors. Either way, the result has been a race to the top. 

If you still believe people are paid what they’re worth, take a look at Wall Street bonuses. Last year’s average bonus was up 15 percent over the year before, to more than $164,000. It was the largest average Wall Street bonus since the 2008 financial crisis and the third highest on record, according to New York’s state comptroller. Remember, we’re talking bonuses, above and beyond salaries.

All told, the Street paid out a whopping $26.7 billion in bonuses last year. 

Are Wall Street bankers really worth it? Not if you figure in the hidden subsidy flowing to the big Wall Street banks that ever since the bailout of 2008 have been considered too big to fail. 

People who park their savings in these banks accept a lower interest rate on deposits or loans than they require from America’s smaller banks. That’s because smaller banks are riskier places to park money. Unlike the big banks, the smaller ones won’t be bailed out if they get into trouble.

This hidden subsidy gives Wall Street banks a competitive advantage over the smaller banks, which means Wall Street makes more money. And as their profits grow, the big banks keep getting bigger. 

How large is this hidden subsidy? Two researchers, Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz, have calculated it’s about eight tenths of a percentage point. 

This may not sound like much but multiply it by the total amount of money parked in the ten biggest Wall Street banks and you get a huge amount – roughly $83 billion a year.  

Recall that the Street paid out $26.7 billion in bonuses last year. You don’t have to be a rocket scientist or even a Wall Street banker to see that the hidden subsidy the Wall Street banks enjoy because they're  too big to fail is about three times what Wall Street paid out in bonuses.

Without the subsidy, no bonus pool. 

By the way, the lion’s share of that subsidy ($64 billion a year) goes to the top five banks – JPMorgan, Bank of America, Citigroup, Wells Fargo. and Goldman Sachs. This amount just about equals these banks’ typical annual profits. In other words, take away the subsidy and not only does the bonus pool disappear, but so do all the profits.  

The reason Wall Street bankers got fat paychecks plus a total of $26.7 billion in bonuses last year wasn’t because they worked so much harder or were so much more clever or insightful than most other Americans. They cleaned up because they happen to work in institutions – big Wall Street banks – that hold a privileged place in the American political economy. 

And why, exactly, do these institutions continue to have such privileges? Why hasn’t Congress used the antitrust laws to cut them down to size so they’re not too big to fail, or at least taxed away their hidden subsidy (which, after all, results from their taxpayer-financed bailout)? 

Perhaps it’s because Wall Street also accounts for a large proportion of campaign donations to major candidates for Congress and the presidency of both parties. 

America’s low-wage workers don’t have privileged positions. They work very hard – many holding down two or more jobs. But they can’t afford to make major campaign contributions and they have no political clout. 

According to the Institute for Policy Studies, the $26.7 billion of bonuses Wall Street banks paid out last year would be enough to more than double the pay of every one of America’s 1,085,000 full-time minimum wage workers. 

The remainder of the $83 billion of hidden subsidy going to those same banks would almost be enough to double what the government now provides low-wage workers in the form of wage subsidies under the Earned Income Tax Credit.

But I don’t expect Congress to make these sorts of adjustments any time soon. 

The “paid-what-your-worth” argument is fundamentally misleading because it ignores power, overlooks institutions, and disregards politics. As such, it lures the unsuspecting into thinking nothing whatever should be done to change what people are paid, because nothing can be done. 

Don’t buy it. 

Almost everyone knows CEO pay is out of control. It surged 16 percent at big companies last year, and the typical CEO raked in $15.1 million, according to the New York Times. 

Meanwhile, the median wage continued to drop, adjusted for inflation. 

What’s less well-known is that you and I and other taxpayers are subsidizing this sky-high executive compensation. That’s because corporations deduct it from their income taxes, causing the rest of us to pay more in taxes to make up the difference.  

 This tax subsidy to corporate executives from the rest of us ought to be one of the first tax expenditures to go, when and if congress turns to reforming the tax code.

We almost got there twenty years ago. When he was campaigning for the presidency, Bill Clinton promised that if elected he’d end the deductibility of executive pay in excess of $1 million.

Once in office, though, his economic advisers urged him to modify his pledge to allow corporations to deduct executive pay in excess of $1 million if the pay was linked to corporate performance – that is, to the value of the company’s shares. (I hate to sound like a told-you-so, but I was the one adviser who wanted the new president to stick to his campaign promise without creating the pay-for-performance loophole.)

Clinton agreed with the majority of his advisers, and a new provision was added to the Internal Revenue Code, Section 162(m), allowing corporations to deduct from their tax bills executive compensation in excess of $1 million, if the compensation is tied to company performance.

How has it worked out? Even Senator Charles Grassley, the ranking Republican on the Senate Finance Committee, agrees it’s been a sham:

162(m) is broken. … It was well-intentioned. But it really hasn’t worked at all. Companies have found it easy to get around the law. It has more holes than Swiss cheese. And it seems to have encouraged the options industry. These sophisticated folks are working with Swiss-watch-like devices to game this Swiss-cheese-like rule.

One such game has been to hand out performance awards on the basis of nothing more than an upward drift in the value of the stock market as a whole, over which the executives played no role other than watch as their company’s stock price rose along with that of almost every other company.

Another game has been to back-date executive stock options to match past dips in the companies’ share price, thereby exaggerating the subsequent upswing and creating fatter “performance” bonuses. 

Not only are shareholders taken to the cleaners by these maneuvers. So are you and I and other taxpayers.

The Economic Policy Institute estimates that between 2007 and 2010, a total of $121.5 billion in executive compensation was deducted from corporate earnings, and roughly 55 percent of this total was for performance-based compensation. Given all the games, it’s likely much of this “performance” was baloney.

So what’s the answer? As I argued 20 years ago, keep the cap at $1 million and get rid of the performance-pay loophole. Executive pay in excess of $1 million shouldn’t be deductible from corporate taxes, period.