In Canada’s New Gilded Age, CEOs are enjoying record pay, earning a worker’s average yearly salary by the morning of January 2. It doesn’t have to be this way.
A mansion in Bridle Park, Toronto, one of Canada’s wealthiest neighborhoods. (Jeff Hitchcock / Wikimedia Commons)
Welcome to “Canada’s Gilded Age.” That’s what the Canadian Centre for Policy Alternatives (CCPA) is calling the era of runaway corporate salaries and bonuses. The name is fitting. In a new report, the think tank finds that 2022 was a smashing success for CEOs, who broke records with an average annual pay of $14.9 million — a surge of $600,000 above their 2021 remuneration. It’s good work, if you can get it.
However, for the rest of us that aren’t corporate executives, the struggle to make ends meet continues. The average CEO salary shakes out to 246 times the earnings of the average worker, which means that by the morning of January 2, chief executives had earned as much as one of their workers does in a year. This stark reality exposes a rigged system.
The CCPA reveals that CEO salaries grew by 4.4 percent last year — amounting to an average increase of $623,000. While this growth falls beneath the 6.8 percent inflation rate, but we can safely assume that the brass was able to weather the rise in prices comfortably. In fact, they may have even welcomed the higher costs, given that much of their compensation is tied to expanding revenue and profits.
Canada is Broken
Workers, on the other hand, saw a 3 percent pay bump, translating to a meager $1,800 for the year. When put against the inflation rate, this essentially means they took a hefty pay cut, compromising their ability to meet basic needs such as food and housing and transportation.
A fall report from Food Banks Canada found that more people accessed a food bank last year than in any year since it began collecting data in 1989. In March 2023, nearly 2 million people in Canada relied on a food bank, and more than 17 percent of visitors were employed. According to HungerCount 2023, food bank use has surged to 80 percent higher than 2019 levels, with one month witnessing over 640,000 visits by children.
Workers struggle to survive while CEOs make off like bandits on the backs of their labor. It’s the same old story.
The housing market softened in Canada last year, but the housing crisis is still firmly entrenched, putting tremendous pressure on workers and others struggling to afford shelter. The average home price in Canada in the fall was $757,600, according to RatesDotCa — or 141 percent more than most people can afford.
In cities like Toronto and Vancouver, the situation is even more dire, with home prices at 250 percent and 210 percent of the affordable level, respectively. Renters face an even bleaker scenario. Average rents for a one-bedroom apartment in November 2023 was $2,174 — with units in Vancouver going for $2,866, with Toronto close behind at $2,594.
With Inequality Like This, Who Needs Feudalism?
Workers struggle to survive while CEOs make off like bandits on the backs of their labor. It’s the same old story. Dog bites man — news at 11:00. What is making the story worse, however, is that the problem is escalating, evident in both US and Canadian data.
According to the Economic Policy Institute (EPI), CEO pay declined slightly in 2022. Nevertheless, the cumulative increase over the period between 1978 and 2022 was over 1,200 percent dwarfing the rawboned 15.3 percent bump to workers’ pay.
In the United States, CEOs are now paid 344 times more than the average worker. That’s way, way, way up from 1965, when they absconded with a mere twenty-one times the pay of a worker. A CEO-worker pay divergence of nearly two-dozen-fold isn’t exactly a worker’s utopia, but it’s certainly a lot better than sixteen times that rate.
When the powerful set the rules, they set them to benefit their class. It doesn’t have to be this way.
Runaway CEO pay is egregious and gross as a phenomenon in and of itself. But as the EPI and CCPA each point out, it’s more than a symbolic issue. Soaring rates for the top brass exacerbates economic and power inequality, contributing to the concentration of wealth within the executive class at the expense of the working class. This, in turn, enables elites to shape and safeguard economic and political regulations in their favor. They thereby wield power over factors that affect the entire polity, such as setting their own pay, enjoying preferential tax treatment on earnings, and engaging in rent extraction. While this is all great for CEOs, it’s bad for economic productivity and it kneecaps the possibility of real gains for working people.
So, what is to be done? Quite simply, the rules need to change. Rules shape outcomes. When the powerful set the rules, they decide what the outcomes are going to be. Naturally, they set the rules to benefit their class. It doesn’t have to be this way. An organized and mobilized working class that leverages its power for political change can remake the rules in the interests of the many.
De-Gilding the New Gilded Age
The CCPA recommends introducing new top income brackets targeting extreme pay. Revenues from the bracket could be redistributed to fund social programs, infrastructure, and other prosocial undertakings. In the same spirit, they call for a wealth tax to achieve these goals.
Addressing the favorable tax treatment enjoyed by the rich, the think tank suggests that Canada should eliminate the rule that sets limits on the deductions a company can take from pay packages. This means that pay over a million dollars would no longer count towards a tax break against corporate earnings. They also recommend an increase in the capital gains inclusion rate. Since shares often make up CEO pay and generate capital gains when sold, they are currently taxed at a preferential rate compared to earned income. Right now, a mere 50 percent of capital gains are taxable. The CCPA argues we ought to tax a greater proportion of capital gains, and they’re right.
Canada’s Gilded Age is terrible for workers and bad for the economy. As the rich gain more power and entrench themselves further, the economy becomes less productive, and workers lose leverage to secure fair pay, better working conditions, and advocate for a robust welfare state. The more the rich consolidate power, the more the government prioritizes their interests over the many.
Year after year, reports reveal the massive and ever-expanding gap between top earners and those from whom they extract their incomes. Until the rules change, and until power shifts, this dynamic will remain the same. While there appears to be no ceiling on the disparity in CEO–worker power and pay, the first step in breaking this trend is setting a minimum standard. We just need to set it — envisioning a new order in which egalitarianism takes precedence and workers, without whom everything crumbles to dust, receive their proper rewards.Original post