Must-Read: Larry Mishel: New Research Does Not Provide Any Reason to Doubt that CEO Pay Fueled Top 1% Income Growth
Must-Read: I must say, I gotta score this for Larry Mishel and company. There’s a lot of overclaiming in “Firming Up Inequality”
New Research Does Not Provide Any Reason to Doubt that CEO Pay Fueled Top 1% Income Growth: “‘Firming up Inequality’ by [Jae Song, David J. Price, Fatih Guvenen, and Nicholas Bloom]…:
…The authors claim that their results disprove the claim made by me and others, such as Thomas Piketty and Emmanuel Saez, that the growth of top 1 percent incomes was driven by the pay of executives and those in the financial sector…. In fact, the study neither examines nor rebuts claims about executive pay. The authors also offer a “we live in the best possible world” interpretation of their findings [that] inequality is due to high productivity growth of “superfirms”… pure speculation… completely disconnected from their actual empirical work… productivity trends… contradict [it]…. They imply huge wage disparities have opened up between median workers across firms within an industry… implausible….
The Bakija et al. (2012) analysis… show[s]… executives account for roughly 40 percent of the growth of top 1.0 and top 0.1 percent household incomes. Financial sector employees account for another 23 percent of the growth…. One need only compute the amount of executive pay in the top 1 percent now and in the past to assess whether executive pay fueled top wage growth. The authors of ‘Firming up Inequality’ could have done so for all wage income…. They have data on all firms, publicly traded and privately held, and this would be a very useful contribution. Absent such an analysis, their evidence does not overturn our findings…