Users of recruiting software know that salary details are the stickiest part of any hiring process. But it’s important to consider salaries with some perspective.

A few months ago, I wrote a blog post on the minimum wage, reminding readers that a minimum wage employee that works full time will only earn around $17,300 per year. Not nearly a Living Wage.

A few readers responded with some interesting – and perhaps troubling – statistics:

>> CEO Compensation Compared to Average Production Worker
    2007: 344 to 1
    2006: 364 to 1
    2005: 465 to 1
    2004: 431 to 1
    2003: 301 to 1
    2001: 525 to 1
    1990: 107 to 1
    1982: 42 to 1
    1970: 28 to 1

>> Since 1990, if the minimum wage rate had risen at the same rate as CEO pay, minimum wage would now be $23.03 instead of $7.25.

>> The average compensation for 200 chief executives at America’s largest public companies was $10.8 million EACH in 2008.

>> The average total salary (including benefits and incentives) in America was around $88,000 in 2008. CEO salaries tend to distort that average.

In 2009, President Obama and Congress used their muscle to limit executive pay at companies that received bailout money, and some think that such limits should apply to all businesses. Others fought the idea fiercely.
I am pretty sure that such limits would effect the economy as a whole and low-paid workers in particular. Companies might struggle to find competent executives to manage multi-million and multi-billion dollar enterprises, and when their performance slipped, low-paid workers would be (as they almost always are) the first to receive pink slips.

I’m not in favor, in other words, of a free market when it comes to executive compensation. That means that there will be excesses and there will be cases of executives getting millions even though their companies go down the tubes, while at the same time, the market will keep worker salaries in line with supply, demand, and performance.

And yet…I’m not entirely happy with that position, just as I wouldn’t be entirely happy with a pure free market for workers (that is, a system with no minimum wage in place). A lot of company boards have woken up to the problem of excessive executive compensation in the past few years. Only a few – like Ben & Jerry’s – have tried tying executive salary to the wage of someone else in the company (a strategy that was ultimately abandoned by Ben & Jerry’s). More have tied salary and other forms of compensation (like stock options) to the company’s overall performance, even adding “clawback” provisions should the price of stock go down or the company lose lots of money (or both).

I’ll write more on this in a future post. First, I’d like to know what you think, so please leave a comment below.