This article explores how the pay gap between CEOs and employees affects income inequality and people’s well-being in different countries. Researchers have long studied how societal factors like globalization and tax policies influence income inequality. However, less is known about how company practices, such as how much more CEOs are paid compared to regular employees, impact society. This study focuses on the CEO-to-employee pay ratio, which measures how much more CEOs earn than their employees, and examines its effects on societal income inequality and citizens’ subjective well-being (a person’s overall life satisfaction). The study also looks at how government welfare policies might influence these effects. This article uses data from 53 countries over 15 years, analyzing the CEO-to-employee pay ratio and its impact on income inequality and well-being. The researchers used a method called pooled panel data analysis, which combines data from different countries and years to identify patterns. They measured income inequality using the Gini coefficient (a measure of income distribution where 0 represents perfect equality and 1 represents maximum inequality) and subjective well-being using survey data from the Gallup World Poll. The study also considered the role of the welfare state, which refers to government policies that redistribute income and provide social services, in moderating these effects. The study found that a higher CEO-to-employee pay ratio is associated with greater income inequality and lower subjective well-being in the following year. This means that when CEOs earn significantly more than their employees, it can lead to wider income gaps and lower life satisfaction among citizens. The study also found that the negative impact on well-being is stronger in countries characterized by larger government size and stronger welfare-state arrangements. This suggests that in countries where the government plays a larger role in promoting income equality, people may be more sensitive to pay disparities within companies. The findings highlight the importance of considering company pay practices as a factor in societal inequality and well-being. The study suggests that addressing pay disparities within firms could help create more equitable and satisfied societies. Future research could explore how multinational corporations’ pay practices affect host countries and how different types of government redistribution policies might influence these relationships. This text was initially drafted using artificial intelligence, then reviewed by the author(s) to ensure accuracy .
Jiang et al. (Thu,) studied this question.