Robert Reich's CEO Pay Chart Is Wrong. Here's the Real Math.

The former U.S. labor secretary presents economic data in deceptive ways.

By Aaron Brown of Reason. 

"Robert Reich, an emeritus professor at the University of California, Berkeley, and a former U.S. labor secretary, makes popular economics videos arguing that the U.S. economy is rigged against workers.

One of his recent pieces caught my eye because it makes heavy use of numbers and charts. The video is a great example of how to misuse economic data to support a preconceived narrative—in this case, a fairy-tale account of evil CEOs stealing wealth from their employees.

At the outset of the video, Reich presents a chart showing that in 2024 the "typical worker" earned $36.49 per hour, while CEOs made—"ready for this?" Reich asks viewers—$431.80!

There are lots of problems with this chart, starting with the fact that it's labeled "CEO Salaries," but that's not what the $431.80 figure represents. Though he rarely sources his work, Reich's chart matches data from a report by the Economic Policy Institute (EPI), which measures what the leaders of the largest 350 public corporations in America earn, not all CEOs.

There are about 4,000 publicly traded corporations headquartered in the U.S., and even more privately held companies. They all have CEOs. Reich has cherry-picked the wealthiest and most successful faces in the crowd. This is like measuring what the highest-paid actors earn, setting aside all the struggling performers waiting tables, and claiming that acting is the world's most lucrative profession.

If you broaden the lens to include CEOs at ordinary-sized companies, Bureau of Labor Statistics (BLS) data show their pay looks a lot like that of other professionals: Median CEOs make about $200,000 a year, and their pay is growing at about the same pace as everyone else's.

Another problem is that the $431.80 is compensation realized in 2024. Most of it came from stock options granted for performance in previous years. In the prior five years, stock prices had roughly doubled, allowing CEOs to cash in compensation from past years. It's a lot of money, but perhaps not out of proportion to five years of service steering the world's largest and most successful businesses through the pandemic and doubling shareholder wealth. And only the CEOs who survived the turmoil and delivered the doublings were around to collect it. In a down year for the stock market, you might see compensation drop by 80 percent.

The CEOs of the largest American companies have seen their compensation grow at an extraordinary pace, but that's because the businesses they run have grown so large. A highly regarded paper by economists Xavier Gabaix and Augustin Landier, "Why Has CEO Pay Increased So Much?" showed that CEO compensation should scale with firm size, and that this effect explains the entire rise in CEO pay.

Today, Nvidia's market cap alone is more than two and a half times the entire S&P 500's market cap when it was created in 1957, adjusted for inflation. Comparing CEO pay at the largest firms in 1968 vs. what they make today is like equating the director of a late-night commercial for a personal injury law firm to the director of a Hollywood blockbuster. Nvidia CEO Jensen Huang impacts more economic value in an afternoon in 2026 than James Roche did as the CEO of General Motors in all of 1968.

The same compensation explosion has occurred across every winner-take-all field, affecting top athletes, movie stars, and best-selling authors. The highest NBA salary in 1968 was Wilt Chamberlain's $250,000-a-year deal with the Lakers, and the team also agreed to cover his taxes. Chamberlain's salary alone works out to roughly $2.2 million in today's dollars. Compare that to Steph Curry's record-setting $62.6 million pay package in the upcoming NBA season.

Yet Reich claims that "the system is rigged." Is the NBA also rigged in favor of Curry? Against whom?

Reich has more evidence that the economy is rigged against workers. He presents another chart showing, in his words, that "big corporations chronically underpay workers compared to the workers' productivity on the job. Productivity, that is, the value of their output, has soared and resulted in record corporate profits."

The source of Reich's chart, which shows the productivity-pay gap, was once again the EPI, which compares workers' earnings over time to the productivity of the U.S. economy.

The measure they used for worker pay doesn't include all employees. It's just "nonsupervisory workers," so it excludes management. The EPI says that it uses this dataset because it represents "the typical worker," or "roughly 80% of the U.S. workforce." The purpose of the chart, they explain, is to answer "a crucial question: Do typical workers in the United States share in the benefits of economic growth?"

The problem is that the EPI is drawing on an untrustworthy dataset. In 2005, the BLS published a note in the Federal Register repudiating its measure of nonsupervisory workers' earnings, stating that it had "limited value."

The agency also noted that the distinction between a "supervisory" and "nonsupervisory worker" was "not meaningful to survey respondents" and "that it is not possible to tabulate their payroll records" to reflect this distinction.

In 2003, Patricia Getz, who was in charge of employment statistics at the BLS, noted that "records are not kept for these groupings of workers," so employers weren't filling out this portion of the survey.

And this series only counts regular paychecks. Bonuses, profit sharing, and stock grants, which represent how a growing share of American workers are paid over the exact period this chart covers, are excluded entirely. 

The BLS sought to discontinue this data series altogether in favor of the all-employee series. In the end, it continued to collect and publish data on nonsupervisory workers, but the poor data quality renders this chart essentially worthless.

The wage measure favored by the BLS tracks compensation for all employees at all levels, not only because this is a more trustworthy dataset, but on the logical assumption that a company's gains in productivity reflect the combined efforts of all employees, including its officers and supervisors.

Reich also cites gross productivity before depreciation. Consider an Uber driver whose passengers pay $85,000 over a year, of which $30,000 goes toward expenses such as gas, insurance, and fees. The driver's gross productivity is $55,000. But her car might have depreciated $15,000, so the net productivity is $40,000. That $15,000 wasn't stolen from her paycheck by a greedy CEO; it's a true loss in economic value.

This matters because over the period Reich discusses, corporate assets shifted from slow-depreciation assets such as steel mills to faster-depreciating assets such as computers and software. Depreciation has risen from 12 percent of national income to 17 percent. Reich is counting that 5 percent difference as stolen from workers, but in fact, it disappeared.

Regardless, if we use the data favored by the BLS and compare all worker compensation to productivity, the divergence between pay and productivity disappears.

Reich's theory that workers are getting shafted has a third component: He claims that CEOs are "siphoning" profits into stock buybacks to boost their own compensation.

"Stock buybacks," he claims, "reduce the number of shares available for investors to purchase, which drives up the value of the remaining shares. Just simple supply and demand."

This is an elementary accounting error. Take a $10 billion market-cap company with 100 million shares trading at $100 each. It decides to do a 10 percent buyback, spending $1 billion to buy 10 million shares for $100 each. The $1 billion cash it spends makes it a $9 billion company. It now has 90 million shares outstanding. The stock price is the same $100 per share outstanding.

Of course, in real life, things are not so neat. Investors tend to take a buyback announcement as good news; the insiders think the stock is undervalued, and bid the price up a few percent. There are other cases where investors take the opposite view: The buyback is a sign the company has no better use of its cash and is fading. But the point is it's not "simple supply and demand"; it's a signal that might or might not help the stock price.

Moreover, Reich misunderstands the purpose of a stock buyback. Companies have two ways of transferring profits to their shareholders: They can pay a dividend or they can do a buyback. The economic effect is the same.

Reich sees buybacks as a way of diverting profits to themselves rather than sharing them with their workers. "Corporations and their CEOs are instead siphoning them off into stock buybacks," he says.

They're not "siphoning" money. They're paying out profits to their owners. All investors, even greedy ones, are entitled to a share of the earnings of the companies they own. That's the deal. And without it, nobody would invest in the first place.

"Stock buybacks used to be considered illegal stock manipulation until Ronald Reagan came along," Reich says. "CEOs can now effectively give themselves a raise while workers get the shaft."

Stock buybacks were never "considered illegal stock manipulation." In 1982, the SEC clarified a gray area, simplifying the legal treatment of stock buybacks and making it easier for companies to use them as an alternative to paying dividends.

Reich claims that stock buybacks are worse than paying dividends because they're a way for CEOs to enrich themselves. "These rising share prices bump up CEO pay because increasingly part of their compensation is in shares of stock," he says.

The problem with this theory is that boards of directors, not CEOs, decide whether to pursue stock buybacks. These are the same directors who negotiate CEO compensation. Buybacks are an item on the negotiation checklist, like benefits and contract length, not something CEOs sneak in afterward to inflate their earnings.

What's the evidence on how buybacks affect CEO compensation? A study in the Journal of Accounting and Economics found the relationship between buybacks and CEO compensation was spurious. Research by a compensation consulting firm that examined S&P 500 buybacks from 2018 to 2021 found the same picture from inside the boardroom: Pay packages rest on multiple performance metrics, and the companies making the largest buybacks adjust their incentive targets to cancel out the share-count effect.

So what does Reich conclude from all of this misinformation and misconceived data? That we need a slew of policies to rein in American capitalism. He says we should "raise the federal minimum wage," "strengthen labor unions," "use antitrust laws to break up big corporate monopolies," "raise taxes on corporations," and "ban stock buybacks."

Apart from his misinformed discussion of stock buybacks, Reich doesn't address those issues in his video. Instead, all he's done is cherry-pick the compensation of the top CEOs in America and use a faulty data series to claim the economy is rigged against workers.

The charts and numbers we use to argue about important questions in public life are too often presented in deceptive ways. It doesn't get much more deceptive than this video."

Friedman on Immigration: Setting the Record Straight

By Chris Freiman.

"Even people who are otherwise enthusiastic about a free market in labor can get cold feet about immigration once redistribution enters the picture. Some are fond of quoting Milton Friedman, who famously (or infamously) said:

“It’s just obvious you can’t have free immigration and a welfare state.”

On this view, immigration is fine under fully free market institutions, but in the actual world with its abundant government-provided benefits, immigration restrictions are justified to protect taxpayers from the added expense that could arise if immigrants consume these benefits. But this conclusion is too quick, and even Friedman’s position is more nuanced than people on both sides of the immigration debate tend to realize.

An initial point, though: the concern about the fiscal cost of immigration is overstated. For one reason, in the United States, most welfare spending goes to the very young or the very old. Immigrants, by contrast, are disproportionately of working age.

Setting that point aside, Friedman’s own view wasn’t that immigration as such is harmful. He argued that legal immigration is the problem, precisely because it allows immigrants to access government benefits. By contrast, he thought illegal immigration was beneficial. As he put it: “It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But it’s only good so long as it’s illegal.” Friedman’s reasoning was that illegal immigration enables mutually beneficial market exchange while limiting immigrants’ access to government benefits.

Now, many fiscal conservatives balk at Friedman’s recommendation—namely, if the overconsumption of government resources is the problem with lawful immigration, the solution is to encourage people to break the law. I understand this reaction, but I admit I don’t share it. In my view, whether it’s okay for someone to do something doesn’t depend on whether lawmakers give them written permission. For instance, did you know that it’s against the law to drive on Cape Cod’s National Seashore’s beach if there’s not a tire-pressure gauge in your car? Nevertheless, I have no moral objection if you drive on the beach gaugelessly. Regardless of whether government officials approve, this is just a peaceful activity that doesn’t violate anyone’s rights.

Maybe you disagree with me. Still, as others have suggested, there’s another way to accommodate Friedman’s general idea: admit immigrants as lawful permanent residents but restrict their access to certain government resources. Economists sometimes call this a “keyhole solution”—if the problem is immigrants’ consumption of benefits, then design a policy that narrowly targets that problem rather than restricts their freedom to immigrate entirely.

The main objection to this sort of policy seems to be moral rather than economic. Indeed, Friedman himself was asked about it and he replied that he found the proposal unappealing partly because it’s not “desirable to have two classes of citizens in a society.” That’s a good point. It’s unfair for a government to give some citizens taxpayer-financed benefits but not others. If two people live, work, and pay taxes within a country, government officials should treat them equally, which involves giving them both equal access to government resources.

Notice, though, that a policy of immigration restriction also treats citizens and prospective immigrants differently—it gives citizens, but not immigrants, access to domestic labor markets, private associations, educational opportunities, and more. Consequently, a principle of equal treatment actually seems to imply open borders. Given that Friedman rejects this option, the task becomes that of identifying the second-best solution. (Also, it’s not clear that Friedman can square his objection to keyhole solutions with his endorsement of illegal immigration, which would presumably also create two classes in a society.)

Why think that a policy of open immigration with restricted access to benefits is better than outright exclusion? The reason, in brief, is that admission with conditions treats prospective immigrants better than exclusion. A policy of open immigration with restricted benefits at least gives people the option to move, and it’s hard to see how giving someone a new option could make them worse off.

Here’s an analogy. Suppose John is entering the job market. One employer offers him a job with health insurance and a retirement plan. The next day, he receives another offer—this one comes with no benefits, but a much higher salary. Even if you think he should take the first job, it seems perfectly permissible to offer him the second. John is no worse off for having another option. If he doesn’t want to take it, he can simply decline it. And if he does prefer higher pay without benefits, he’s clearly better off for having the option.

John’s case is analogous to the case of a prospective immigrant who expects to earn significantly more by moving to a country where her access to government benefits is limited. If she prefers having access to a wider range of government-provided benefits in her current country to having higher earnings but fewer benefits in a new country, she can decline to move; in this case, she is no worse off for having the option. But if she prefers higher earnings with fewer benefits, the option makes her better off. Just as it’s permissible—indeed, probably good—to offer John the extra option, so too is it permissible to offer prospective immigrants the extra option.

It’s also worth highlighting another important aspect of restricting immigrants’ access to benefits rather than restricting their movement entirely. Admitting immigrants as lawful permanent residents removes the threat of deportation, among other consequences, that accompanies undocumented entry into a country. Even if you agree with Friedman (as I do) that the keyhole solution of admitting immigrants with reduced access to benefits isn’t totally fair, it’s still more fair than denying prospective immigrants the option of safely moving at all."

Businesses leaving Illinois have rapidly accelerated

 Tweet from Brian Costing.

 

The average federal income tax rate has risen for the top 20% since 1979 but fallen for others and the federal tax code remains progressive

Tweet by Jessica Riedl of Brookings.

 

 

Did median wealth in the U.S. fall nearly 20% from 2020-2025?

See The U.S. Added 1,200 New Millionaires a Day Last Year by Miriam Gottfried of The WSJ. Excerpt:

"While average wealth per U.S. adult climbed by almost 10% between 2020 and 2025 net of inflation, median wealth fell by nearly 20%."

This was based on a report from UBS, A Swiss multinational investment bank and financial services firm (according to Wikipedia). 

But I am skeptical. I looked at some data from the Federal Reserve on the wealth of the bottom 50% over these years and even if we adjust for population growth and inflation, it is clear that per person wealth of the bottom 50% has gone up over these years (and it is possible that the numbers at the Fed site are adjusted for inflation but it just does not say).

The Fed site is Distribution of Household Wealth in the U.S. since 1989. (Hat Tip to Timothy Taylor for this link-his blog is The Conversable Economist).

This graph shows that wealth for the bottom 50% in the U.S. about doubled from $2 trillion in 2020 to $4 trillion in 2026

 

It might be hard to see but it does say "Bottom 50%." You can got to the link and select bottom 50% to see for yourself. They also have an option to see a table with these numbers. This link will take you directly to the table.

In the 2nd quarter of 2020, the bottom 50% had $2.21 trillion in wealth. In the 2nd quarter of 2025 it was $4.13 trillion. So it was up 87%. The U.S. was up just 3.3%. See US Population by Year.

So if the total is up 87% and the number of persons is up just 3.3%, the wealth per person must be way up. And this is for the bottom 50%. Median means that half are below a certain number and half are above. The article says the median wealth went down. But that seems unlikely if the per person wealth of the bottom 50% is up.

If we adjust for inflation (and the numbers might have already been adjusted, I just can't tell), let's use the CPI increase of 24% from 2020-25. See Consumer Price Index Data from 1913 to 2026. I got the % increase by using the yearly average for each year.

So let's reduce the $4.13 trillion wealth owned by the bottom 50% in the 2nd quarter of 2025 by 24%. That gets us about $3.14 trillion. That is 42% higher than the $2.21 trillion in the 2nd quarter of 2020. Which is still much higher than the 3.3% increase in the U.S. population. That means per capita wealth increased for the bottom 50%. That makes me skeptical that the median wealth went down.

Air Conditioning, Scourge of the French Left

Heat waves kill thousands in Europe, but politicians resist the relief Americans can take for granted

By Alexander Kustov. He is an associate professor of global affairs at the University of Notre Dame. Excerpts:

"The French left argues that air conditioning is a selfish indulgence and an ecological menace. Jean-Luc Mélenchon, the country’s most prominent left-wing leader, warned that cooling would mean “increasing the damage,” and says he wouldn’t expose his grandchildren to air conditioning because it “destroys your sinuses.”"

"The economist Alan Barreca and his colleagues found that the spread of home cooling explains most of the decline in “hot-day-related fatalities” in the U.S. since 1960."

"Air conditioning accounts for about 3% of global emissions today, and in France, where two-thirds of the power is nuclear and much of the rest is low-carbon, running a unit is close to carbon-free."

"a group of left-wing economists, among them Joseph Stiglitz, Thomas Piketty and Kate Raworth, declared economic growth “a doomed strategy” and signed on in support of a road map, developed by United Nations Special Rapporteur Olivier De Schutter, for a new “degrowth economy.” Its policies aim to reduce material consumption, shorten the workweek, and impose caps on personal income. Underlying this road map is the idea that wanting to be comfortable is shameful."

"In France, a condominium owner generally needs the consent of the other owners to install air conditioning. In the country’s heritage zones, a state architect can veto any unit visible from the street. In England and Wales, an air conditioner that has no heating function requires permission. The canton of Geneva issues a permit for comfort cooling only to people who prove they need it. Spain forbids public and commercial buildings from cooling below 80 degrees."

"The left’s most respectable voices are telling grandmothers to draw down the shutters and wait it out." 

Tennessee students make gains with tutoring and a back-to-basics approach that emphasizes phonics

See National Test Scores Are Dropping. This State Is Fighting Back by Chao Deng of The WSJ. Excerpts:

"As schools across the nation search for remedies, one of the most closely watched efforts is playing out in Tennessee. The state’s schools—once among the U.S.’s worst-performing—have made gains with intensive tutoring, mandatory summer school for struggling pupils and a back-to-basics approach that emphasizes phonics."

"From 2022 to 2025, Tennessee ranked second out of 38 states in math improvement and fourth out of 35 states in reading gains"

"The state’s most recent scores on a key national test placed it 17th out of 50 states and Washington, D.C."

"up from near the bottom in 2009"

"Much of the work has revolved around early literacy and carefully tracking schools’ and students’ progress."

"American schools have wrestled with learning loss for the better part of a decade and no one has found a panacea. Stalling of student progress in K-12 math and reading coincided with less emphasis on standardized tests and a rise in social-media use."

"Researchers believe the secret lies in the components of a state’s plan and how they are implemented. Mississippi, which began emphasizing phonics-based literacy instruction over a decade ago, has since made major academic strides, for example. Researchers say the key ingredients likely included investing in literacy coaches, holding schools and districts accountable, and holding back struggling students at the end of third grade."

"Tennessee policymakers required districts to adopt high-quality instructional materials and trained teachers on how to implement evidence-based reading in classrooms. A 2021 state law required third-graders scoring just below reading proficiency to show “adequate growth” at the end of summer camps to advance to fourth grade."