June 01, 2018
In conjunction with its annual CEO pay survey, The New York Times unveiled the “Marx Ratio,” which shows that the median pay of employees is generally greater than the profit per employee among large companies.
The alternative ratio, named for economist Karl Marx, aims to “capture the relationship between a company’s profits—the return to capital, on a per-employee basis—and how much its median employee is compensated, a rough proxy for the return to labor."
After initial disclosures failed to provide earth-shattering revelations, pay ratio proponents are turning to other uses. The Marx Ratio, presented by Times senior economic correspondent Neil Irwin, provides the first major alternative use of pay ratio disclosures the Association has seen to date. This is likely just the first of many.
“Companies with high Marx Ratios offer particularly strong rewards to their shareholders relative to workers,” Irwin states. Ratios above one indicate a more favorable return to shareholders relative to workers while ratios below one signal “a more favorable return to labor."
Even the Times downplays the significance and accuracy of the ratio, instead promoting the tool for "understanding the differences between companies and industries.”