Shareholders gained 50 times as much as US workers in pandemic

SHAREHOLDERS in some of the biggest US companies reaped wealth gains in the pandemic that outpaced pay hikes for their employees by more than 50 to 1, according to a study by the Brookings Institution.

The report - focused on 22 industry leaders, including Amazon.com and McDonald's - found that stockholders added some US$1.5 trillion in wealth between January 2020 and October 2021. The companies spent about US$27 billion on additional pay and bonuses, and 5 times that amount on dividends and stock buybacks, the Washington-based think tank said.

Brookings said it was seeking to measure the corporations by the standard they set for themselves - specifically, an August 2019 declaration organised by the Business Roundtable, and signed by 181 chief executives. That document promised a shift away from shareholder primacy toward a "more inclusive" corporate model that would put more weight on other stakeholders, including workers.

"Nearly all of the companies fell short," analysts Molly Kinder, Katie Bach, and Laura Stateler wrote in the report published on Thursday (Apr 21). "Financial gains benefited wealthy shareholders and executives, while frontline workers experienced the greatest losses and benefited minimally."

The research underscores wealth gaps that widened in the pandemic, as the gains from soaring asset prices - especially stocks, where ownership skews heavily toward the highest earners - outpaced pay increases and extra government benefits that flowed to workers.

Across the 22 companies in the Brookings study, the average increase in inflation-adjusted wages over the period ranged between 2 and 5 per cent. Because of the "very low starting point, the vast majority of workers still earn too little to get by" - with only 7 of the 22 firms paying at least half of their workers enough to cover basic expenses, Brookings said.

Meanwhile, 16 businesses in the group carried out share buybacks worth some US$50 billion, enough to have raised the annual pay of their median worker by about 40 per cent, Brookings found.

Rising pay, especially for low-wage jobs, has been a feature of pandemic labour markets where workers are in shorter supply. Amazon boosted some starting wages to US$18 an hour last year and publicly supports a US$15 an hour base wage in the US The leader of a push to unionise the company's warehouses says workers are seeking US$30 an hour. McDonald's raised average pay by about 10 per cent last year.

Some financial analysts say the trend represents a threat to corporate profits. Morgan Stanley strategists warned that companies will have a tougher time raising prices to offset the higher costs of labour, eating into margins.

The Brookings researchers said they monitored wage announcements and company disclosures and corresponded with each company to confirm the data. Only 2 companies - Walt Disney and Dollar General - didn't respond, they said. BLOOMBERG