> if fortune 500 CEO pay is up less than 11% on avg since 2020
Yeah well, in reality it's up considerably more. They didn't get to be the 0.1% by accepting sub-inflation pay raises for the last 100+ years. Here is what their actual raises were:
19% in 2021, 16% in 2020, ~14% in 2019 & 2018. Sources below.
Meanwhile that's what average hourly wages increased by:
If you want to make your argument, show a profession which has ACTUALLY been getting sub-inflation raises for a decade or more, but you still consider to be overpaid. It's no coincidence that such combination doesn't exist.
A mere 4.1% points difference in their annual pay raises, but it really adds up over the years – pilots started the past decade with lower wages than lawyers, yet ended it much better off. Keeping pace with inflation is extremely important.
I don't think that's a good analogy. The value of a CEO should be relatively well known before hiring into a company. CEOs are rare, and at the endgame of their career, so you're already pricing in the present and future value you think they will add to your company. CEOs generally can't job hop every couple years for a large double digit raise.
Most good engineers(especially early in their career) will be an order of magnitude more productive after a couple years at the same company, as they build up both domain knowledge in their tech space, and institutional knowledge that can't be learned outside of the company. And companies know the value of this experience. That's why you can switch jobs after 2 years for a 20-40% increase. When the market rate for your labor is 1.2x your current salary, I think that's called underpaid.
My point here has nothing to do with CEO pay. Or engineer pay.
My point is that dev pay being off a few percent since 2020 because of high inflation does not by itself decide the question of whether they're overpaid or not.
Patrick Mahomes doesn't get a pay raise adjustment every year for inflation. That doesn't mean his $500m football contract makes him underpaid.
The grandparent comment reads as if devs are underpaid because their pay isn't fully keeping up with some unusual inflation since 2020.
Engineers might not be underpaid due to inflation, but inflation can make them feel underpaid, because they're getting paid less than they were. They see that they're doing the same work as before but getting less for it, and thus the current amount must be too low. The idea that the previous amount was too high is less likely to occur to them.
> I don't think that's a good analogy. The value of a CEO should be relatively well known before hiring into a company. CEOs are rare, and at the endgame of their career, so you're already pricing in the present and future value you think they will add to your company.
Some would say CEOs are paid to increase corporate profits, thus their value is their ability to raise corporate profits.
However, the Kalecki-Levy profit equation (an accounting identity which originated in 1908 and is still accepted as true) makes clear that in aggregate, corporate profits == government deficit.
Thus the single largest driver of corporate profits is not CEO activity, but government fiscal policy.
So CEOs are paid based on what the government does.
Are you pricing in value, or pricing in a specific amount of dollars? Because if you're actually pricing in value, then even though the value stays constant, the dollar amount of the value goes up with inflation.
I agree with your point that regular employees should be expected to get more raises than CEOs, because regular employees can improve more. This doesn't really relate to inflation though, except to the extent they are both factors that lead to raises.
Companies would be smart to chuck in 10% bonus after a year, 20 after 2 etc. to 50 after 5 and lock that in at hiring time. Like you say: domain knowledge. You would end up with smaller more productive and happy teams. In addition pay increases to market.
Asking too much? “Waaah! It is really hard to find good developers” is a stuck record on loop since 2016 at least
> if fortune 500 CEO pay is up less than 11% on avg since 2020
It's up a /lot/ more than that! And what do you know, they're also not underpaid. The former will predict the latter pretty damn well, I think you'll find. So yes, strictly speaking, annual raises and having the market power to command meaningful ones do actually have everything to do with being over/under paid.
I'm not making a statement of fact about CEO pay since 2020. I'm saying that whether or not it's up by more or less than inflation since then has nothing to do with them being fundamentally overpaid.
Apply this to dev pay as well. Just because you're a few % off since 2020 after inflation does not mean $300k salaries are overpaid or that they're appropriate. They're two unconnected data points.
If you don't have the market power to have garnered a good pay increase over the past 2 years of record profits you're almost certainly underpaid, like teachers, nurses etc. If you got massive pay increases you're almost certainly overpaid, like CEOs.
The connection is right there. Maybe these two things could somehow become disjointed but they really don't appear to be such in any meaningful way in the current economy.
there's two "meaning" to being underpaid; 1) the work being done is captured by another party, and thus underpaid to the worker doing the work. An extreme example is slavery - they are underpaid.
2) the second meaning of underpaid is the perception from other people that the profession is producing value for society, but the payer of that work (usually tax payers) is not compensating for the value dispersed throughout society. Examples might be teachers.
I can understand the first notion: the 'price' offered is not enough to clear the market. In your example, there are fewer people who voluntarily would be doing slave labour for slave wages, than willing employers.
The second is a bit nebulous. I think it's mostly down to social desirability bias: people say stuff that sounds good, but doesn't make much sense.
To clearly illustrate my point here, if fortune 500 CEO pay is up less than 11% on avg since 2020, I don't think that's an argument they're underpaid.