The Misleading CEO/Employee Pay Gap Lament

Our recent Wall Street Journal op-ed highlights some of the problems with the notion that the CEO/employee pay gap is too big, a popular lament from union-backed groups who argue that the gap is justification for increasing the minimum wage.

In the piece, we highlighted the case of Yum Brands, the parent of well-known restaurants like Pizza Hut, Taco Bell, and KFC, and a popular target of SEIU-backed protests. Its five member executive team made a combined $30 million in compensation in 2013, according to SEC filings – seemingly a large pot that could be redistributed to its hourly employees. But because Yum also employs so many people – 539,000, 86 percent of whom are part time – these funds would have only negligible impact in hourly wages if redistributed.

For example, if the executive team could somehow take 25 percent of its total compensation and distribute it evenly to Yum’s 463,000 part time workers, hourly wages would only rise by a penny. Even if the executive team took a 100 percent pay cut, hourly wages would only increase by five cents.

Total Executive Compensation Total Part-Time Employees Raise Per Hour
Yum Brands $30 million 463,000 5 cents
Walmart $63 million 600,000 8 cents

Assumed part-time employees work 25 hours per week, 50 weeks per year
Data Sources: SEC 2013 company filings: Schedule 14-A, Schedule 10-K

The results of this analysis aren’t unique to Yum Brands. Take Walmart, for example, another multi-billion dollar company that union-backed activists groups like OUR Walmart have accused of paying its executives too much. Walmart’s five member executive team earned double that of Yum’s in 2013 at a combined $63 million. But they also have a ton of employees to distribute the money to: We estimate that Walmart has roughly 600,000 part-time employees in its workforce.* Even if Walmart’s executives took a 100 percent pay cut and distributed it equally to their part-time employees, hourly wages would only rise by eight cents.

Of course the truth is that executive compensation has very little bearing on what a company’s employees earn. It just serves as a misleading and – as these analyses show – moot talking point for those looking to push through big labor’s agenda.

*Note: Walmart doesn’t provide a breakdown of full-time and part-time employees in its annual report. However, recent news stories on the company’s decision regarding health coverage for 30,000 part-timers indicated that this represented five percent of its part-time workforce. Working backward, we arrived at roughly 600,000 part-time employees.