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Pay for globe-trotting CEOs has soared to new heights, even as most workers remain grounded by paychecks that are barely budging.
1. Blame the robots.
Millions of factory workers have lost their spots on assembly lines to machines. Offices need fewer secretaries and bookkeepers in the digital era.
Robots and computers are displacing jobs that involve routine tasks, according to research by David Autor, an economist at Massachusetts Institute of Technology. As these middle-income positions vanish, workers are struggling to find new occupations that pay as much. Some must settle for low-paying retail and food service jobs.
College tends to substantially improve people's earnings power compared with workers who have completed only high school. But even workers who have attended college have been hurt by the loss of middle-income jobs.
Nearly 45% of US workers who earned less than $10.10 an hour last year had either attended college or had graduated, according to an analysis by John Schmitt, a senior economist at the liberal Center for Economic and Policy Research.
2. High unemployment.
The aftermath of the Great Recession left a glut of available workers. Businesses face less pressure to give meaningful raises when a ready supply of job seekers is available. They're less fearful that their best employees will defect to another employer.
The current 6.3% unemployment rate, down from 10% in October 2009, isn't so low that employers will spend more to hire and keep workers. Wages grew in the late 1990s when unemployment dipped to 4%, a level that made high-quality workers scarce and compelled businesses to raise pay.
Companies can cap wages by offshoring jobs to poorer countries, where workers on average earn less than the poorest Americans. Consider China. A typical Chinese factory employee made $1.74 an hour in 2009, according to the Bureau of Labor Statistics — roughly a tenth of what their US counterpart made.
Some analysts say this decades-long trend may have peaked. But many economists say the need for the United States to compete with a vast supply of cheap labor worldwide continues to exert a depressive effect on US workers' pay.
4. Weaker unions.
Organized labor no longer commands the heft it once did. More than 20% of US workers were unionized in 1983, compared with 11.3% last year, according to the Bureau of Labor Statistics. That has drastically reduced the unions' sphere of influence. Result: Fewer workers can collectively negotiate for raises.
5. Low inflation.
For the past five years, the government's standard inflation gauge, the consumer price index, has averaged an ultra-low 1.6%. When inflation is high, employees tend to factor it into requested pay raises. But when inflation is as low as it has been, it almost disappears as a factor in pay negotiations. Workers typically settle for less than if inflation were higher.
How AP and Equilar calculated CEO pay
For its annual survey of CEO pay, The Associated Press used data provided by Equilar, an executive pay research firm.
This year, Equilar examined the regulatory filings detailing the pay packages of 337 CEOs. Equilar looked at Standard & Poor's 500 companies that had filed statements with federal regulators between Jan. 1 and April 30, 2014. To avoid the distortions caused by sign-on bonuses, the sample includes only CEOs in place for at least two years.
To calculate CEO pay, Equilar adds salary, bonus, perks, stock awards, stock option awards and other pay components.
Stock awards can either be gifts of stock, meaning the CEO gets it right away, or "restricted" stock, meaning theCEO has to meet certain goals before getting it. Stock options usually give the CEO the right to buy shares in the future at the price they're trading at when the options are granted. All are meant to tie the CEO's pay to the company's performance.
To value stock and option awards, Equilar uses the companies' estimates on what those stocks and options could eventually be worth when the CEO receives the stock or cashes in the options. Their actual value in the future can vary widely from what the company estimates.
Equilar calculated that the median CEO pay in 2013 was $10.5 million. That's the midpoint, meaning half the CEOsmade more and half made less.
Here's a breakdown of 2013 pay compared with 2012 pay. Because the AP looks at median numbers, rather than averages, the components of CEO pay do not add up to the total.
—Base salary: $1.1 million, up 4.8%
—Bonus: $1.9 million, up 12.6%
—Perks: $164,951, up 2.8%
—Stock awards: $4.5 million, up 17.3%
—Option awards $1.25 million, down 4.2%
—Total: $10.5 million, up 8.8%