New report: Corporations are choosing shareholder windfalls over workers’ raises

A stock buyback is when a publicly traded company purchases shares from its own shareholders. In the corporate world, it’s a way to push or keep stock prices up and to funnel profits to executives, shareholders and speculators. The company then can sell the stocks again.

In the first quarter of 2018, S&P 500 companies completed a record $187.2 billion in buybacks, according to S&P Dow Jones indices. And, as predicted by market analyst firms such as Moody’s, worker wages have not increased since passage of the tax bill.

A new report by the National Employment Law Project assesses the magnitude with which companies are choosing to spend their profits on stock buy backs rather than wage increases for workers. The report finds that between 2015 and 2017 nearly 60 percent of profits at the nation’s largest corporations were spent on stock buybacks instead of wage increases.

In low-wage sectors, these dynamics were even worse. For example, retail corporations spent 79 percent of their profits on stock buybacks, while restaurant corporations paid for stock buybacks at a clip that exceeded their profits. They spent 137 percent of their profits — meaning they dipped into reserves or spent credit beyond what they earned to fund windfalls for shareholders.

While stock buybacks have existed for a long time, their use has accelerated dramatically in recent decades alongside record inequality and wage stagnation. If corporations invested in raises instead of stock buybacks, the impact would be a huge win for workers and the economy.

According to NELP, with the money it spent on stock buybacks McDonald’s could instead pay all its 1.9 million workers almost $4,000 more per year. Starbucks could deliver a $7,000 raise to workers. Home Depot, Lowe’s and CVS could give raises to every worker of at least $18,000 a year.

The full report, “Curbing Stock Buybacks: A Crucial Step to Raising Worker Pay and Reducing Inequality,” can be found here.