As
I’ve argued against the excesses of capitalism and the failure of the
trickle-down economic model I’ve heard multiple conservatives argue that
feeding money into the top and boosting the value of the company is a win for
everyone, including the workers at the bottom.
They contend that most all of us have 401(k)’s and those retirement
vehicles invest in mutual funds that hold stock in various companies across
corporate America. So, when
circumstances are created to boost corporate profits (i.e. Tax Cuts and Jobs
Act) we all benefit. The only problem is
that an actual look at real numbers proves they’re argument is a red herring.
As an example, Jeff Bezos owns 78,893,280 shares of Amazon
stock, making him the largest shareholder by far. The largest institutional holder is Vanguard
with a mere 27,872,279 shares. Amazon
has 487,740,000 total shares. So Bezos,
the CEO of Amazon, controls roughly 16% of the shares. Amazon does not currently pay dividends. Instead the company chooses to hold on to
profits and reinvest. A strategy that,
in general, helps push the stock price higher.
So let’s see what a $50 jump in the price of Amazon stock does for Mr.
Bezos and the portion of my retirement account held outside my current 401(k)
(Note: Amazon’s stock has had multiple days with price jumps of $50 or greater
this year). Mr. Bezos would see the
value of his holdings increase a whopping $3,944,664,000 or nearly $4
BILLION. Meanwhile the impact on the
value of my retirement account, once the increase is filtered through all the
shares held by my various mutual funds and then shared among all the other
investors in those mutual funds, goes up by a pathetic $8.09.
Now let’s shift the scenario to a company that does
regularly pay dividends – Microsoft.
Microsoft just paid a dividend of 1.56% on 8/17/18. Closing price that day was $107.58. Running the figures (again without attempting
to account for fees & expenses) shows that dividend netted my retirement
account a scant $5.21. Bill Gates on the
other hand earned $280,255,557.50. CEO
Satya Nadella earned $1,880,270.46.
(Figures for Gates and Nadella based on most recent public figures on
shares held).
So when conservatives try to argue that boosting corporate
profits is a win for everyone, it’s a bit Orwellian – everyone wins, but some
win more than others. For starters there
are no reasonable circumstances where one person earning $5.21 can claim the
same win as someone who just earned over $280 million. My $8 isn’t even a drop compared to the $4B
Jeff Bezos earned.
Even if you wanted to try and claim that I still won,
there’s a key difference in my winnings versus those of Gates and Nadella. When Bill Gates gets his dividend check,
that’s money he can spend immediately.
My measly $5 is stuck in a retirement vehicle that I can’t touch until
I’m in my 60’s. I realize that $5 will
grow in the account and help me retire someday, but it would definitely be nice
to have a bit more in my pocket now as well.
And that’s the real rub, retirement me can appreciate the small growth of
my retirement account. However, current
me is dealing with real life and trying to pay all the bills.
Thomas Friedman, in his book The World is Flat makes some interesting distinctions regarding the
multiple roles we all hold – consumer, taxpayer, employee, stockholder. These roles are not all aligned to the same
goals. Friedman compares Wal-Mart and
Costco to help demonstrate the differing roles.
Citing a November 1, 2004 article in the New York Times, Friedman notes that Wal-Mart insures fewer
employees at higher rates than Costco.
As a result, Costco has smaller profit margins that Wal-Mart. At the same time, taxpayers end up
subsidizing Wal-Mart employees’ health care because so many of them are either
on Medicaid or have no insurance. The
consumer in us wants Wal-Mart’s low prices and the stockholder wants their
profit margin. At the same time, the
employee and the taxpayer want Costco’s benefits package. Friedman correctly notes that we are going to
have to sort these roles out to continue moving forward in today’s global
economy.
For the most part, Millennials are more interested in the
employee and taxpayer roles. Quite
frankly, as already noted, we’re not getting much real benefit from the stockholder
role. And we’ve come to the logical
conclusion that we would prefer to pay a slightly higher price and have the
company fairly compensate its employees.
Because here’s the thing, we can either pay a bit more for the goods and
services we want from a company, or we can pay more in taxes to keep various
assistance programs afloat.
This is the problem with the Republican version of
capitalism and the single minded pursuit of profit. It creates a system where employers are
incentivized to pay as few benefits as possible in order to maximize
profit. Why do you think so many
Wal-Mart employees work less than 30 hours a week? Or that Amazon uses a lot of temp staffing
agencies to staff its warehouses?
Full-time is defined as 30 hours or more per week. Full-time employees have to receive benefits;
part-timers don’t. Amazon avoids paying
benefits to the warehouse worker because, technically, that employee works for
the temp agency and we all know temporary workers don’t count as full-time
employees either (even if they’re working 30+ hours each week) At the same time, Republicans are constantly
telling us how people on welfare are just lazy and we should strip away funding
for Medicaid, SNAP, TANF, and a whole host of assistance programs. So Republicans don’t want to force employers
to pay reasonable benefits, nor do they want to fund the assistance programs
that many employees depend on to survive.
It doesn’t take a genius to figure out that this is a completely
unsustainable dynamic. The Millennials
seem to be figuring that out. It’s too
bad the Baby Boomers and a fair number of Gen X haven’t figured this out.
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