Morning Must Reads: CEO Pay, Manufacturing Pay and Austerity Economics In Action

The Pittsburgh Tribune-Review reports this morning that the Pittsburgh-based retailer American Eagle Outfitters has hired a new CEO. So what is it like to be the CEO of the company most responsible for millions of tweens wearing sweat pants in locations other than the gym?

Well, for starters, you get a nice signing bonus and $15,000 for your lawyer to review your contract, a luxury car and a severance package equal to two years of your salary plus your stock options should things not work out.

The new CEO made $2.6 million a year at Levi Strauss, so he just got a 242% raise. As King Louis XVI of France was fond of saying, it's good to be king.

American Eagle Outfitters Inc.'s new CEO Robert L. Hanson could make as much as $26.7 million over his first three years with the company, the South Side clothing retailer disclosed in a Securities and Exchange Commission filing.

Averaged over the three-year contract, the $8.9 million a year Hanson could make leading American Eagle would rank him near the top 10 CEOs in Pittsburgh for annual compensation in 2010.

If you are concerned about a lack of good jobs for the 99%, one positive development is that Governor Tom Corbett has formed an advisory council to be housed at the Team PA Foundation to focus on issues important to manufacturing. On average, manufacturing jobs pay better than jobs in the service sector (especially at the low end, see the chart) so it makes sense to do what can be done to expand manufacturing employment.

One member of the Governor's new advisory council highlights the choice between "training our own" workers for good manufacturing jobs versus importing new talent. Given the combination of wage stagnation and high unemployment faced by Pennsylvania workers, we think the priority should be training our own.

One of the biggest issues for manufacturers is recruiting new talent, especially for the factory jobs and metallurgy engineering positions, said David Barensfeld, CEO of Ellwood Group Inc., an Ellwood City-based manufacturer that makes engineered heavy metal sections for specialty equipment manufacturers.

'We need to train more of our own or allow more of the foreign students' to remain in the United States, Barensfeld said.

Of course, employers get more tempted to press for importing talent when they perceive the skill levels of Pennsylvania's young people as inadequate. Here, cuts in educational funding in concentrated-poverty communities make it more likely that employers long-term will give up on a large fraction of the American workforce. For example, the end of Recovery Act federal aid to state and local governments and state budget cuts for schools means the Scranton School District has lost $4.8 million in state and federal funding.

Anticipating an increase in expenditures, a decrease in revenue and bound by law to not increase taxes by more than 2.1 percent, the district must cut almost $3 million from its 2012 budget...

The budget also accounts for a $2.1 million loss in state funding and a $2.7 million loss in federal funding.

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