Fast-food CEOs make 1,000 times more than their workers

Fast-food restaurants are serving up plenty of food for discussion in the debate over income inequality.

Fast-food chief executives take home $1,000 for every $1 dollar earned by their average workers, making it the most unequal sector within the U.S. economy, according to a new report from public policy group Demos.

While CEOs have always made more than the rank-and-file, the income disparity in the fast-food sector has become a gaping chasm. Since 2000, the average fast-food restaurant CEO has seen his pay more than quadruple. The average burger-flipper, meanwhile, has seen her income inch up 0.3 percent since 2000.

That gap adds stress to the economy by holding down workers' purchase power, a problem in a country where consumers account for 70 percent of economic activity. Fast-food workers around the U.S. have staged numerous strikes over the last year to demand a higher minimum wage.

The disparity in pay between top execs and front-line employees also hurt shareholders because of the potential for labor unrest and lawsuits, the liberal-leaning think-tank says.

"This level of inequality is bad for investors," Nell Minow, co-founder of GMI Ratings and a corporate governance expert, said in a conference call on Tuesday hosted by Demos. "If I thought this would lead to long-term growth, I would be in favor of it, but it doesn't. It doesn't work for shareholders. Obviously, you need to pay your lower-level employees enough so they can create the kinds of lives where they can buy products."

That pay disparity makes the fast-food industry one of the most unequal, with the AFL-CIO noting that the average CEO-to-worker pay ratio last year was 331-to-1. In 1980, the typical chief executive made 42 times what employees earned, and 20 times in 1950.

In dollar figures, the average CEO of a fast-food company took home $23.8 million last year. By comparison, the average hourly wage of a fast-food worker was just $9.09, or less than $19,000 a year -- if that worker could get full-time hours, which the report notes is also difficult.

Polls suggest most Americans support raising the minimum wage, which has been proposed by President Obama. But opponents such as the National Restaurant Association, which counts many fast-food restaurants as its members, claim higher wages will limit hiring.

Disclosing average CEO-to-worker pay ratios is one way to start addressing the problem, noted New York City Comptroller Scott Stringer, who also took part on the conference call. "I have long believed excessive CEO pay poses a risk to investors," he noted, mentioning his work as a trustee and investment advisor to the city's pension funds.

Demos' report comes on the heels of another highly critical report of the restaurant industry's pay practices. Top executives at restaurant chains have taken home more than $662 million in fully tax deductible "performance pay" over the past two years, which reduced their corporate tax bills by $232 million, the left-leaning Institute for Policy Studies recently found.

At the same time, many of low-paid fast-food workers turn to public assistance to get by, with more than half of front-line fast-food workers enrolled in one or more public programs, according to a 2013 study from the University of California, Berkeley Labor Center and the University of Illinois.

That point was highlighted by Minow, who noted that many fast-food workers work full time, yet still qualify for public aid. "The taxpayers are subsidizing the CEO pay plans," she said.

  • Aimee Picchi

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