Wage ratio

In economics, the wage ratio refers to the ratio of the top salaries in a group (company, city, country, etc.) to the bottom salaries. It is a measure of wage dispersion.

There has been a resurgence for the importance of equitable wage ratio. The amount of money paid out to executives has steadily been on the rise. "An April 2013 study by Bloomberg finds that large public company CEOs were paid an average of 204 times the compensation of rank-and-file workers in their industries. By comparison, it is estimated that the average CEO was paid about 20 times the typical worker’s pay in the 1950s, with that multiple rising to 42-to-1 in 1980, and to 120-to-1 in 2000".^[1] While not as extreme, similar trends have been observed around the world.

With the wage ratio steadily climbing, there has been a push to have increase transparency in publicizing the ratio for many of the world's largest companies. In 2010 President Barack Obama signed into effect the Dodd–Frank Wall Street Reform and Consumer Protection Act. In short, Section 953(b) of the Dodd-Frank Act changed the regulation regarding CEO compensation disclosure to shareholders.^[2]

In addition to the move of the Securities and Exchange Commission, there have been a number of movements around to the world to attempt to regulate the pay ratio of executives.

Switzerland - 1:12 Initiative: Swiss referendum on September 24, 2013 in an attempt to create legislation limiting the amount of executive to just 12 times that of the lowest paid workers.

Canada: The Wagemark Foundation, a Toronto-based not-for-profit organization is working to create an international wage standard certifying organizations that can prove they operate with a wage ratio of 8:1 or lower.

Spain: The Spanish Socialist Workers Party, the official Spanish opposition party, is adopting a ratio as part of their official policy.^[3]

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