Friends,
I wanted to call your attention to this amazing tool from the Economic Policy Institute, which shows exactly how many workers at 66 of the largest American employers earn less than $15 per hour. For ubiquitous brands like Walgreens and Walmart, it’s just over half of all workers. For famously exploitative fast food brands like Subway and Arby’s, four out of five workers earn below $15. The tool also helpfully provides the most recent available information for annual revenue and CEO pay, so you can see that those low wages are in no way tied to corporate profits—these businesses pay the majority of their workforce less than a living wage simply because they can get away with it.
And remember that even a worker with a full-time job at $15 per hour can not afford a two-bedroom apartment anywhere in America right now. So in fact, $15 isn’t an aspirational goal—it’s the absolute bare minimum. In fact, we should begin the conversation about raising the minimum wage even higher, to ensure that no worker lives in poverty.
So what should the minimum wage be? It’s grossly inefficient for our leaders to just announce a new set of numbers every few years—the minimum wage should clearly be connected to economic data, so that prosperity rises for everyone. Some economists argue it should be pegged to worker productivity, as it was for decades in the 20th century. If that was the case, the federal minimum wage should be somewhere over $20 per hour. But if the minimum wage had kept pace with runaway income inequality—if every worker was guaranteed a raise on par with the bonuses that Wall Street executives take home—the federal minimum wage would now be $61.75.
Look around and you can find lots of proposals for economic metrics that the minimum wage should be tied to—local rents, the poverty line, inflation. Many state and local minimum wages go up automatically with the cost of living, but the question is far from settled. One of the most exciting things about economics in the 21st century is that it has been held fixed under incorrect and incurious trickle-down dogma for so long that there are many unsettled questions and unexplored frontiers. We’re still learning how to build an economy that works for everyone.
The Latest Economic News and Updates
American corporations are starving themselves to enrich shareholders
Rick Wartzman at Fortune looks at the growing inequality between workers and shareholders in America. Wartzman examines the statements of six major corporations in 1960 and today, exploring how much of corporate profits used to be devoted to workers, and how much of that profit now goes to the shareholder class.
“At five of the six companies, far less of each dollar goes to employees. At five of the six, more goes to shareholders—sometimes much more. That is mainly the result of stock repurchases, which companies often make in a bid to pump up the share price. Buybacks were largely illegal until 1982,” Wartzman writes. Companies also pay significantly less in taxes than they did 60 years ago, and half of the six corporations have altogether stopped reinvesting corporate profits back into the company, in the form of research and development, new equipment and facilities, and worker pay.
For example, here is what the balance sheet for United Airlines looked like in 1960. Notice that nearly half of the company’s spending is on employees, and 7.3 percent is devoted to shareholders.
And here’s the most recent data for United Airlines, in which the company devotes roughly 21 percent of its revenue to employees, but manages to divert 38.7 percent of revenue back to shareholders:
What’s most shocking is that invisible pie piece in the left hand corner of the second graphic—the 11.4 percent that’s being siphoned out of the business. United Airlines is literally starving its future growth in order to reimburse shareholders—many of whom are executives for United Airlines. That’s not economic growth. It’s a slow form of corporate suicide.
California grocery workers win huge raises
While corporations are busy buying back stock to enrich shareholders, 47,000 unionized grocery store workers in Southern California successfully averted a strike by negotiating the largest raise their sector has seen in decades. Grocery stores like Kroger and Albertson’s have been chipping away at worker pay and benefits for many years, but the threat of a region-wide strike brought even the most exploitative corporations to the table. According to Bobbi Murray at Capital & Main, the new agreement “includes a $4.25/hr. increase for most workers” and “increases the minimum weekly hours of work for eligible part-time employees — a policy that could mean take-home pay increases of as much as $3,000 per year for some employees.”
This isn’t just good news for the union workers who risked their livelihoods to win higher pay—it also will likely prevent some of the damaging shareholder profiteering by diverting outsized profits back into the workforce. And those workers will be happier, more productive, and they’ll likely buy more groceries from their workplace with their larger paychecks. A raise for workers is indisputably better for these corporations than any stock buyback.
Reining in corporate greed through policy and regulation
But the sad fact is that a majority of workers in the US don’t have immediate access to a union that can collectively bargain for higher wages and reverse the gushing flood of profits to shareholders. Other policy solutions are necessary to redirect a healthy amount of corporate wealth to the workers. Eduardo Porter at the New York Times outlines a new attempt to increase pay for workers at exploitative corporations: Antitrust law. The Justice Department is trying to take action against large employers who collude to keep worker pay artificially low.
“The latest criminal indictment, brought in January against owners and managers of four home health care agencies in Portland, Maine, is emblematic of the new approach,” Porter writes. “According to the indictment, the agencies agreed to keep the wage of health aides at $16 to $17 an hour. They encouraged other agencies to sign on, prosecutors said, and threatened an agency that raised its pay to between $17 and $18.50.”
It shouldn't surprise anyone that the first high-profile case the Justice Department is investigating is in the healthcare industry. It’s no coincidence that wage suppression is an everyday practice in the sectors dominated by women and minority workers, because bad employers love to exploit pre-existing prejudices in order to keep their wages low.
And on another front, the Economic Policy Institute points out that state and local revenue from taxes on corporations have dropped by anywhere between a third and a half over the last 40 years. That’s tens of billions of dollars in revenue losses—enough to fund universal pre-K programs around the country. It’s a compelling argument that increasing local corporate taxes might have more direct benefits for people than raising the federal corporate tax rate.
Giving people money is a great poverty-reduction tool
Kathleen Romig at the Center on Budget and Policy Priorities finds that Social Security lifts more people above the poverty line—some 22.5 million Americans—than any other social program, with even greater benefits for people of color and women, who traditionally earned less than their white male peers and therefore are more likely to experience poverty later in life:
It’s yet another data point which proves that the best way to improve conditions for the most Americans is to simply give them money. Social Security works because it arrives on a regular basis, and it doesn’t require them to leap through a ridiculous number of bureaucratic hoops. Its consistency and friction-free delivery allows people to plan ahead and adjust their expenses accordingly.
And tellingly, Social Security lifts many thousands of people above the poverty line in every single state in the union, proving that this isn’t a matter of red vs. blue or partisan politics. Cash payments in peoples’ pockets are a proven, nonpartisan, solution to poverty. Fewer Americans living in poverty means a better economy and society for everyone.
The Biden Administration quietly unspools student debt
While student loan payments continue to be deferred through at least August 31st, more and more leaders are calling for the Biden Administration to forgive some or all of the $1.3 trillion owed in student debt. What’s getting lost in the shuffle is the fact that the Biden Administration is quietly doing a lot to ease student debt. Recently, the administration outright forgave 40,000 student loans and significantly reduced the burden carried by 3.6 million more Americans.
The Biden Administration is clearly moving toward some form of student debt forgiveness, but it’s doing so cautiously and deliberately—and within its legal authority. Experts argue that President Biden may not have the authority to forgive student debt unilaterally, and it’s very likely that any move to do so would result in a series of lawsuits, leaving the matter tied up in the courts. (Congress controls the power of the purse, and a congressionally approved debt forgiveness campaign would be on much sturdier legal ground. But it’s highly unlikely that in a midterm election year Congress will be able to pass any economically popular legislation.)
So instead, the Biden Administration is quietly forgiving debts in small batches—wiping out billions of dollars in student debt in the most surreptitious way imaginable. This strategy makes sense if you want to get the most done without controversy, but it does deprive the president of a big win to brag over in an election environment in which Democrats desperately need a few unalloyed wins.
Real-Time Economic Analysis
Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.
On Civic Action Live this week, we’ll be discussing how an unhealthy obsession with shareholder primacy is doing harm to the long-term health of corporations, what policies our leaders have in their toolboxes to fix the growing inequality between worker pay and shareholder profits, and why Social Security is the greatest anti-poverty program in American history. Join us on Facebook this Friday at 10:30 am, Seattle time.
The Pitchfork Economics podcast this week features an interview with Washington state Attorney General Bob Ferguson about his important work battling noncompete clauses. A majority of American workers—from tech workers to sandwich makers to janitorial workers—have signed noncompete agreements that harm their ability to earn higher wages, and Ferguson has successfully argued that those noncompetes represent an unfair advantage for employers—particularly those in fields like food service.
And in his Business Insider column, Paul argues that ending the practice of stock buybacks is the single most important thing our leaders can do to increase worker power.
Closing Thoughts
The folks at Navigator Research just released a report on an economic focus group they performed with soft partisan and independent voters in North Carolina, Wisconsin, and Nevada. It’s a bracing read, but a necessary one. In short, people are deeply unhappy with the economy, specifically with regards to high grocery and gas prices. And those inflationary prices are causing so much distress in their monthly budgets that they’re finding it hard to believe that the economy added a record number of jobs last year.
These kinds of negative economic perceptions are not just bad political news for the party in power—they also make the world more volatile. The whole world is experiencing inflationary pressure right now, and nationalist forces have traditionally utilized economic unrest as a way to foment the worst instincts of voters and accrue power. Alt-right French presidential candidate Marine Le Pen has used inflation as a wedge issue, and voters have rewarded her with a huge polling spike in the days before the election.
Because inflation is a global issue, and because it’s caused by supply chain disruptions, Covid outbreaks, and other issues outside the control of any single world leader, the bad news is that political leaders don’t have much wiggle room when it comes to voter unrest. They can keep communicating the facts about the situation and what steps they’re taking to resolve it, but there’s no magic solution that incumbents can wave around in time for the midterm elections this November.
If, like me, you’re looking for a ray of hope, it’s probably the fact that these focus group voters recognize the role that corporate greed is playing in the higher prices that they pay. A Republican in North Carolina told Navigator that he understands that supply chain issues are causing prices to go up, but at the same time “all these companies are making record profits. So is it really COVID? Is it really prices or is it just greed?"
To me, that quote speaks volumes. The American people understand that inequality has grown out of control, and that corporations are enriching a small, elite group of shareholders at the expense of their own workers. This is a cause that progressive American leaders can seize on, offering real solutions to rein in corporate greed and return that wealth to the great American middle class.
The American people are ready to hear this story, and great communicators will be able to use corporate price-gouging as a tool to explain how the economy has been broken over the course of the last 40 years, and why rebuilding the economy from the middle out will create better outcomes for everyone. There’s an opportunity here to tell a better story about the American economy, if our leaders are ready to tell it.
Be kind. Be brave. Get vaccinated—and don’t forget your booster.
Zach