The pay gap between chief executive officers (CEOs) in the US and those in other developed countries narrowed substantially during the 2000s, making top executive pay an international concern. Researchers have taken positions on both sides of the debate over whether the level of CEO pay is economically justified.

According to Michael L. Bognanno, who has looked into the contentious topic of CEO pay: “Uproar over high executive pay often accompanies macroeconomic or stock market downturns—when the disparity in pay between top executives and regular workers is most unsettling and poor stock returns call executive performance into question.”

He adds: “CEO pay warrants this attention because it is both large and growing in relation to firm financials.”

IZA World of Labor author Priscila Ferreira has also looked into how increased competition affects the pay incentives firms provide to their managers and may also affect overall pay structures. According to Ferreira: “Empirical evidence suggests that executive pay is related to the level of product-market competition. However, while most shocks or policy reforms that foster competition tend to strengthen the link between competition and performance-related pay, it can also be the case that increasing competition reduces incentives.”

“Also, as firms may change their pay structures, the effect of changes in competition to CEOs’ pay is uncertain,” Ferreira adds.

Read Michael L. Bognanno’s full article: Efficient markets, managerial power, and CEO compensation

Read Priscila Ferreira's full article: Market competition and executive pay 

Read further articles on pay and incentives:

• Do workers work more when earnings are high? by Tess M. Stafford

• Should firms allow workers to choose their own wage? by Gary B. Charness

• Social protection programs for women in developing countries (Deutsch) by Lisa Cameron

• Happiness as a guide to labor market policy (Deutsch) by Jo Ritzen
   

Visit the IZA World of Labor site for more concise, informative, evidence-based articles across the spectrum of labor economics.

All one-pagers are also available to read and download in German. Find out more.
 

One-pagers are now available in Spanish. Take a look at the Spanish key topics page.

Newly arrived in Australia in the mid-nineteenth century, an English gold-digger wrote home that “Rank and title have no charms in the Antipodes.” A few decades later, a bestselling novel dubbed Australia The Workingman’s Paradise. With plentiful land and scarce labor, nineteenth-century Australia had among the highest wages in the world.

As Australia leads into a federal election, many workers are feeling a little less sanguine about the state of the labor market than their nineteenth-century counterparts.

Read the full commentary.

Have a specific labor market query? Get in touch with one of our designated Topic Spokespeople.

• 3rd IZA Workshop on Gender and Family Economics, Joint with Universidad Adolfo Ibañez April 12 - April 13, Viña del Mar, Chile.
  The workshop will create a stimulating environment that will enable participants to engage in discussion and receive valuable feedback on pressing issues in gender- and family-related research and policy. 

• 9th ifo Dresden Workshop on Labor Economics and Social Policy May 16 - May 17, Dresden, Germany.
  The workshop aims to facilitate the networking of young scientists and to promote the exchange of their latest research across the range of labor economics, social policy, education economics, demography and migration. Policy relevant contributions, either theoretical or applied, are highly welcome. We particularly encourage PhD students to submit their latest research.

• 2019 Jobs & Development Conference June 6 - June 7, Washington, D.C., United States.
  Following the success of the 2016 and 2018 Jobs and Development Conferences in Washington DC and Bogotá, the World Bank  in collaboration with IZA (Institute of Labor Economics) and the Network on Jobs and Development are organizing a follow up conference focused on “Improving Jobs Outcomes in Developing Countries.”