A TikTok influencer and business owner went viral after explaining how she runs a business without being “selfish.”
It’s simple according to Madeline Pendleton, the owner of L.A-based online boutique Tunnel Vision, who explains that all she does is pay her nine full-time employees the same salary as she pays herself.
The math is pretty easy.
She takes the annual payroll expense for all employees, $730,000, and divides it by the number of people working at the company—ensuring everyone at the company is on the same $73,000 annual salary.
“It’s just income redistribution,” she says.
In the video, Pendleton cites the 2021 Economic Policy Institute report, which found that in 2020, CEOs of the top 350 U.S. firms made $24.2 million on average.
The study also found that since 1978, CEO compensation has risen 1,322%, while typical worker compensation has only grown by just 18%.
“It’s ridiculous,” she says. “This is what those CEOs are doing, so they can make that $24 million a year while you guys make like $30K or whatever.”
Pendleton emphasizes that any company can equalize its worker’s salaries without having to spend more money as annual payroll expenses won’t change.
For the sake of argument, Pendleton spells out what would happen if she paid her nine other employees minimum wage, which is soon to be $16 an hour in Los Angeles.
At 40 hours a week without any paid holiday, each employee’s annual wage would be just above $33,000 a year.
Pendleton has $730,000 to spend in total payroll costs each year, and if she paid each of her nine employees $33,000 a year, it would leave her with a remaining $430,000 to pocket herself.
Post-COVID executive pay bumps
Some market watchers argue that the rise in median executive payouts is a natural consequence of the stiffer competition for scarce business talent, and paying huge executive salaries adds to stockholder value.
But as the difference between the average worker’s salary and executive grows wider each year, critics argue that whether they increase productivity or not, huge salaries are exacerbating inequality and must be reined in.
Excessive executive pay has recently come into the public eye again, as companies level out their executive compensation after many self-inflicted COVID-19 pay cuts last year.
An analysis of 2021 executive pay, conducted by Compensation Advisory Partners (CAP), found the median total CEO compensation at the 50 companies that have already filed proxy statements by April 1 2022, shot up by a record 19%.
Another analysis by MyLogIQ LLC, a company that tracks salary data from companies, found median compensation rose to $14.2 million in just one year.
While not every CEO saw an increase—a quarter of the CEOs still took a pay cut in 2021—the majority saw their salary rise by at least 11% and nearly a third saw salary hikes of at least 25%.
The big jumps in executive income come at a time when the U.S. is seeing the sharpest rise in inflation in four decades.
And while the hourly wage in the U.S. rose just 4.7% last year, according to the Labor Department, this isn’t enough to keep up with inflation that many analysts predict will likely worsen in the months to come.
Correction, May 5, 2022: a previous version of the article stated that median compensation rose by $14.2 million, when in fact it rose to this amount.
