Paychecks for CEOs Climb - WSJ.com

Q&A: Paychecks for CEOs Climb - WSJ.com

Question:

But don't you think these pay packages are just a little overblown?

Answer:

You should read Art Laffer's article on total labor cost as an input to production (was available last week through Sunday in the WSJ).

Government likes to have people believe they are getting all the benefits that flow through government (including but not limited to social security, medicare, unemployment insurance, etc.) for free or at low cost, but many employers will tell you the gross wage paid to an employee is only 20-25% of the total cost to the employer of having that employee.

Thus, an employer has to look to sell a product at a competitive price - if not, they go bankrupt.

Then the employer has to look at the combination of his labor input costs, his capital input costs and his raw material input costs.

As you read the news, you're aware that the Obama administration has been increasing all three of these costs (Obamacare is a direct increase to labor costs; the deficit, tax increases and bank and investor regulatory policies directly increase the cost of capital; and, the depreciation in the value of the dollar directly increase raw material costs).

The pro-union policies of the administration also hurt domestic job creation (witness how blithely the UAW bled GM and then expected a taxpayer bailout and how the public employee unions have extorted obscene benefits).

Both parties have supported immigration policies that prohibit top university graduates from foreign countries from staying in the US.

So, from what I see, the public is supporting policies which run directly counter to the long-term economic health of the country and, since the government can't admit the failure of its socialist policies, it is trying to blame business and the banks.

But, business needs to survive and the decks are stacked (by government, etc.) against it.

It is ridiculous to criticize greed when it is generally what drives everyone. What should be criticized is anything that prevents an individual from coming up with a new idea or a better idea to go into business for him or herself.

After all in a supply and demand relationship (which is really all that there is), when either side of the balance is distorted, disequilibriums occur.