Walmart CEO Pay: More in an Hour Than Workers Get All Year?

July 2, 2010 — -- By Ed Smith's math, the CEO of Walmart earns more in an hour than his employees will earn in a year.

Smith, an alderman in Chicago, presented posters at a city council meeting showing that Walmart CEO Michael Duke's $35 million salary, when converted to an hourly wage, worked out to $16,826.92. By comparison, at a Walmart store planned for the Windy City's Pullman neighborhood, new employees to be paid $8.75 an hour would gross $13,650 a year.

Smith's numbers could be a bit off. Equilar, an executive compensation research firm, calculates that Duke earned just south of $20 million in 2009 and $28 million in 2008, not counting millions of dollars in potential performance awards. But the alderman argued that there's still a "sad" contrast between Duke's compensation and the wages of his employees.

"How can you go to bed at night and sleep knowing you make this kind of money and the people working for you can hardly buy a package of beans and rice?" he asked in an interview with ABCNews.com.

Walmart, meanwhile, said that its wages across the country are competitive in local markets and that on average, hourly employee pay -- which includes more experienced workers but not managers -- ranges from $10 to more than $12.

The retail giant made no apologies for Duke's salary.

"I don't think Mike Duke needs, as the CEO of a Fortune 1 company, needs me to defend his compensation package," said Walmart director of community affairs Steven Restivo, referring to Walmart's status as the largest company on the planet.

The debate over Walmart wages has been a thorny local issue in Chicago, where city aldermen on Wednesday reluctantly approved plans for a new Walmart store. It also speaks to continued concerns nationwide over the pay gap between top executives and their rank-and-file employees.

A study last fall by the Institute for Policy Studies, a liberal Washington D.C. research group, found that CEOs in the country's S&P 500 companies make, on average, 319 times more than the average American worker.

IPS associate fellow Sam Pizzigati said that in the 1970s, that ratio was 30 to 1.

"We've seen, over the past three decades, a tenfold-plus increase in the gap between top executives and average American workers," Pizzigati said. "That Chicago alderman is putting his finger on a very real problem in American economic life."

Why the Pay Gap Has Grown

Pizzigati said the reasons for the yawning gap are two-fold. Declining top-bracket tax rates over the last half-century, he said, took away a strong disincentive for company boards to keep a lid on CEO pay.

The top marginal tax rate, he said, dropped from 91 percent in the 1960s to 28 percent in 1980s. It stands at 35 percent today.

"If you look at historical record, executive pay really started exploding in early 1980s," he said. "That's when the top rate started precipitously falling."

On the worker side, Pizzigati said, wages have been hurt by the declining power of U.S. organized labor. When it represented more than one-third of the American workforce, unions could influence wages -- and force them higher -- throughout the labor market. With just seven percent of Americans represented by unions today, Pizzigati said, that's no longer the case.