The fanciful claim that everyone except management is now paid less than in the early 1970s is contradicted by every other measure of living standards. The index of real hourly compensation, for example, has increased from 83.8 in 1974 to 123.1 -- a gain of 47 percent.
The flip side of Porter's strained story about capitalist exploitation of the proletariat was dutifully covered on the same day by another New York Times columnist, Gretchen Morgenstern. The latest in her endless series about the stock market gains of corporate executives featured a foot-wide graph -- "The Unstoppable March of Executive Pay." Actually, that graph shows top executive pay marching downward for three years after 2000, before partly recovering along with the stock market in 2004.
Estimates by other critics of CEO pay show even steeper declines. Thomas Piketty and Emmanuel Saez gathered CEO pay from the top 100 in Forbes, and that figure fell by 54 percent from 2000 to 2003. Lucian Bebchuck and Yaniv Grinstein estimated that among the S&P 500 firms, average CEO pay fell 48 percent from 2000 to 2003. An unstoppable march?
Morgenstern tries to blame the increases (but not the declines) on compensation consultant Frederic Cook, who has been in the business since 1973. If that is to be believed, nobody listened to Cook until stocks began to rise in the Reagan years. After that, he must have advised corporations to increase executive pay when stocks soared, and to cut pay when stocks fell. Yet that is exactly what happens automatically when pay consists mainly of stock or options, rather than salary and perks.
Using the same small sample of executive salaries Morgenstern relied on, Xavier Gabaix of MIT and Augustin Landier of New York University found that "the six-fold increase of CEO pay between 1980 and 2003 can be fully attributed to the six-fold increase in market capitalization of large U.S. companies during that period." CEO pay rises and falls with the global value of U.S. companies. That is what "pay for performance" means. Stockholders foot the bill for stock-based CEO pay, not workers or consumers, and stockholders generally like it when the CEO makes money only if they do, too.
Every day from now until Nov. 7 is bound to bring additional evidence to support my thesis that the quality of economic reporting worsens with each passing day as we get closer to the election. If journalistic partisans must resort to statistical cheating to make their case, how can we trust the political party they seem so eager to represent?