> It makes sense from an economic standpoint that the price of labor would not rise when the supply is increased and is likely the cause of income inequality in the US.
So why are CEO salaries still going up? Is there not increased competition for C-level positions in companies from globalization? If not, why not?
There are likely a variety of factors that contribute to CEO salaries increasing.
The increase in the labor supply has mostly affected the low end of the spectrum. You don't usually go from subsistence farming directly to the board room. This will change but it takes a long time to percolate up.
Large corporations are usually conservative with their C level executives. Even if someone else could do a 10x better job you are not going to replace an executive if they are outperforming the market. The threshold for being removed is fairly high.
If you started your own company and own a controlling stake it is highly unlikely that you will be removed, even if you are terrible at your job.
The scale of some of the biggest companies is profoundly larger than in the past forty years. For example McDonalds has 375,000 employees worldwide. Their CEO makes around 15.5 million a year. If you were to distribute his salary to each worker in the company (assuming each works 40 hours a week) you could afford to give a 2 cent raise per hour to each employee.
One explanation would be because of the cheaper labor and favorable legal frameworks the corporation can grow much larger today. Pushing the pay of the top level positions to rise even higher. You could look at C-level positions 50 years ago as a mid-level manager today in terms of managed organization size and economic impact.
In the big 5 that I work for, MBA's become product managers and make less than programmers (per years in industry). They then have to compete for more than a decade (with programmers going into management), for a shot at even VP level.
Guess what, there are some VP's that have 5 more layers of VP, Senior VP's... before C suite.
You want to incentive people to work hard at their jobs to get promoted to the next level so you need to constantly pay them more. When you have 10 layers in your company and people at the bottom are making 6 figures (for software engineers, easily the case), the top level employees are going to make a lot of money.
Are they though? Most of executive compensation plans nowadays are strongly tied to stock performance with a generous options package but a nominal $1 salary. Brings its own set of problems and a tunnel vision that's focused on next quarterly results, but at least it's aligned with large shareholders.
So why are CEO salaries still going up? Is there not increased competition for C-level positions in companies from globalization? If not, why not?