Over the last few days a number of my friends have posted the same video on Facebook. The video shows Elizabeth Warren 'correcting a CEO's math'. The commentary from my friends who posted this video tends to be executive bashing and calling for income redistribution. For the sake of argument I'm going to put aside all of the reasons I do not favor wage controls. Instead, I thought I'd do some very rough, back-of-the-envelope type calculations about what we could accomplish through income redistribution. Because the aforementioned video relates to fast food, I'll stick with fast food for my calculations.
McDonald's
According to McMichigan.com a McDonald's location employs 61 people on average. Worldfranchising.com says each location employs about 50. That gives us a ballpark figure, I'll say 50. Reference.com and About.com both say there are about 13,000 McDonald's locations in the USA. Yes, I realize there could possibly be questions of reliability there, but I'll trust them for the purposes of this post. Multiplying these two gives a figure of 650,000 employees in the USA. Macroaxis.com says there are only 440,000 McDonald's employees in the United States. According to Bloomberg.com, the CEO makes $8.75 million. So, how about that greedy fat cat gives up some of that money that he doesn't really need. What if he gives up all of his salary? 8.75 million, divided amongst 440,000 employees, is $19.89. If the CEO's entire paycheck were redistributed each employee would get less than $20 per year, and that is taking the lower figure of 440,000 employees nationwide.
What about other businesses?
Wendy's
CEO salary: $4,200,000 (according to QSR Magazine)
Employees: 44,000 (Macroaxis.com)
Results of redistribution: $95.45 per employee per year
Starbucks
CEO salary: $10,700,000 (according to QSR Magazine)
Employees in the USA: 150,000 (Reuters and Jobs.com)
Results of redistribution: $71.33 per employee per year
Assuming that there would be no negative consequences of taking away the CEO's entire salary, that still seems like pretty meager gains to each individual employee. What's the take-away, in my opinion? The rich fat cat executives are not greedily hoarding money that could, if redistributed, make a difference to the lower level employees. They are paid quite handsomely because they create a great deal of value for consumers, investors, and employees. (Yes, there are exceptions, like on Wall Street and in Detroit, but that is a subject for another post.)
McDonald's
According to McMichigan.com a McDonald's location employs 61 people on average. Worldfranchising.com says each location employs about 50. That gives us a ballpark figure, I'll say 50. Reference.com and About.com both say there are about 13,000 McDonald's locations in the USA. Yes, I realize there could possibly be questions of reliability there, but I'll trust them for the purposes of this post. Multiplying these two gives a figure of 650,000 employees in the USA. Macroaxis.com says there are only 440,000 McDonald's employees in the United States. According to Bloomberg.com, the CEO makes $8.75 million. So, how about that greedy fat cat gives up some of that money that he doesn't really need. What if he gives up all of his salary? 8.75 million, divided amongst 440,000 employees, is $19.89. If the CEO's entire paycheck were redistributed each employee would get less than $20 per year, and that is taking the lower figure of 440,000 employees nationwide.
What about other businesses?
Wendy's
CEO salary: $4,200,000 (according to QSR Magazine)
Employees: 44,000 (Macroaxis.com)
Results of redistribution: $95.45 per employee per year
Starbucks
CEO salary: $10,700,000 (according to QSR Magazine)
Employees in the USA: 150,000 (Reuters and Jobs.com)
Results of redistribution: $71.33 per employee per year
Assuming that there would be no negative consequences of taking away the CEO's entire salary, that still seems like pretty meager gains to each individual employee. What's the take-away, in my opinion? The rich fat cat executives are not greedily hoarding money that could, if redistributed, make a difference to the lower level employees. They are paid quite handsomely because they create a great deal of value for consumers, investors, and employees. (Yes, there are exceptions, like on Wall Street and in Detroit, but that is a subject for another post.)
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