According to a study conducted by Brookings Institution, the shareholders of some of the largest U.S. companies saw their wealth increase during the pandemic. In many cases, they surpassed employees’ pay hikes by 50 times.
As per Bloomberg News, 22 industry leaders in the U.S. were featured in the study report, including McDonald’s Corp. and Amazon.com Inc. It found that stockholders’ wealth increased by around $1.5 trillion between January 2020 and October 2021.
On the other hand, these companies paid $27 billion on incremental pay hikes and bonuses five times on stock buybacks and dividends.
The Washington-based Brookings said that the corporations were measured according to the standards they had set for themselves in the august 2019 Business Roundtable declaration signed by 181 CEOs. The document had promised a shift towards a more inclusive corporate governance model than just shareholders.
According to analysts Katie Bach, Molly Kinder, and Laura Stateler, nearly all companies fell short of the target. Their report published on Thursday said that financial gains benefited only the executives and wealthy shareholders. In contrast, the frontline staff benefited minimally and experienced the greatest losses overall.
The studies showed that the wealth gap widened during the pandemic as gains from soaring commodity prices and other assets, mainly stocks. The ownership was heavily tilted towards the biggest earners, whereas pay hikes and government benefits to workers were lower.
The study by Brookings across the 22 companies they studied showed an average increase in wages after inflation adjustment varied between 2% to 5% during the period. Most workers’ very low starting point meant they earned too little to get through. In contrast, only 7 of the 22 companies paid 50% of their workers just enough to cover their basic expenses.
Brookings also found that 16 companies in the study group carried out buybacks of shares worth approximately $50 billion, which was enough to raise the pay by 40% for the median workers.
Did the pandemic make any difference?
During the pandemic, a feature seen in the labor market was raising pay for low-wage jobs as the job market experienced a shortage of labor supply.
Amazon Inc. maintained the $15 an hour basic wage pays while boosting in some places the starting wage to $18 an hour in 2021 in the U.S. The leader who pushed to unionize the warehouse said that workers were looking for $30 an hour pay. Last year Mcdonald’s raised their workers’ pay by 10%.
According to some financial analysts, this trend can threaten the profits of corporates. Strategists at Morgan Stanley warned that higher labor costs would increase profit margins, and companies will find it tough to raise prices to offset these increased expenses.
Brookings researchers confirmed that they monitored company disclosures and wage announcements and corresponded with each of the 22 companies to confirm the data. Only two companies – Dollar General Corp and Walt Disney Co. did not respond to them.
