STRF/IPx 2021
A Walmart store in Stillwater, Oklahoma in 2021. More than half of the company’s workers are paid less than $15 per hour.
By multiple metrics, this is a pretty good time to be an American worker. Unemployment is at nearly the lowest level since World War II, the number of job openings dwarfs the number of job seekers, the quit rate is at an all-time high, and wages are rising.
Except, as one remarkable survey released today by the Economic Policy Institute (EPI) demonstrates, the number of workers in starvation-wage jobs still numbers in the many millions.
And, as another remarkable study by Rick Wartzman of Claremont Graduate University’s Drucker Institute demonstrates, American corporations have massively redistributed their revenues from employees to shareholders over the past six decades. Wartzman’s survey was first published by Capital & Main.
The EPI study, undertaken in conjunction with the Shift Project, surveyed nearly 21,000 service-sector workers at 66 prominent corporations in 2021, to collect information on hourly wages. The study, entitled the Company Wage Tracker, groups those wages in seven categories, from under $10 an hour to $20 or higher, and shows what percentage of that company’s workers fall in each of those categories. The data for each of those companies is available by clicking on those companies’ logos, which are displayed on the survey’s main page.
The data are no less dismaying for being unsurprising, at least to those who attempt to follow our actual economy. The company logos are displayed alphabetically, from Ace Hardware (71 percent of whose workers make less than $15 an hour) to Wyndham Hotels (87 percent of whose employees make under $15). At Dollar General, McDonald’s, Sonic, Subway, Waffle House, and Wyndham, more than 1 in 5 workers make less than $10 an hour; at Pizza Hut, it’s 1 in 4.
Comparing the company’s pay rates makes clear that business models can make a major difference. While 51 percent of Walmart workers make less than $15 and 91 percent make under $20, just 1 percent of employees at Costco are paid under $15, and over half make over $20. Walmart’s roots in the rural South and its reliance on military-style management differ sharply from Costco’s, which started out seeking a unionized clientele, and one of whose founders, Sol Price (whose Price Club merged with Costco in 1993), was as liberal as Sam Walton was conservative.
The business model in Bezos-World is in a class by itself. Since Amazon pledged a $15 an hour minimum wage in 2018, no workers make under that amount; but 87 percent make under $20. In Bessemer, Alabama, that likely means Amazon pays more than comparable employers; in New York City, it surely does not. The fact that Amazon warehouses and delivery drivers have to be in or close to cities where pay is higher than rural areas is doubtless one reason why pay levels must be higher than at Walmart, the nation’s only larger employer, which serves a less-urban clientele. But the fact that practically nobody advances enough to get a raise over the $20 level shows that the Amazon business model is structured to attract entry-level workers with pay, burn them out with the pace and difficulty of the work (yearly turnover is 150 percent of the workforce), and attract new entry-level workers.
The level of worker power—which in America ranges from some to, more commonly, none—makes a difference, too. At UPS, which long has been unionized by the Teamsters, fully 63 percent of employees make more than $20 an hour, while at non-union FedEx, just 40 percent make $20 or more. I suspect the wage levels at UPS are a major reason why FedEx pays even 40 percent of its workers that much, lest they decide to go Teamster and start driving for the unionized company. UPS’s union shop has insulated it from having to find workers in a tight labor market, giving it lower turnover and better reliability during the supply chain crunch.
Minimum wage levels set by various states play into the variances, too. Among supermarket chains, Albertsons and Safeway have hundreds of stores in California, where the minimum wage was $14 last year, when the survey was undertaken. Those companies had 36 percent and 35 percent of their workers, respectively, making under $15. In California, as well, workers for those two chains tend to be union members with the United Food and Commercial Workers. For chains with a higher share of workers in states with low minimum wages and few unionized outlets, the rate of workers making less than $15 is far higher: 48 percent for Kroger and 77 percent for Food Lion.
Fast-food companies weigh in as expected (89 percent making under $15 at McDonald’s, 83 percent at Arby’s, 83 percent at Burger King, 78 percent at Subway), and non-food retail does not clock in much better (86 percent make less than $15 at Ross Dress for Less, 80 percent at Bath and Body Works, 72 percent at the Gap).
And then there’s Starbucks, which recurrent CEO Howard Schulz would have you believe is a workers’ paradise. In fact, fully 63 percent of the Baristas make less than $15, and just 11 percent make $18 an hour or more.
Wartzman had to limit his study, which compares the share of corporate revenues going to employees in 2019 to the share going to employees in 1960, to the handful of companies that now even publish such data. But that data are, if anything, even more upsetting than EPI’s, even though neither are at least conceptually surprising to anyone who’s studied the American economy over time.
What Wartzman has produced, with the assistance of some faculty at Columbia’s Business School, are pie charts for six corporations, comparing how they allocated their revenues in 1960 to how they apportioned them in the last pre-pandemic year of 2019. The corporations are American Express, Chrysler (now Fiat Chrysler), Union Pacific Railroad, United Airlines, United States Steel, and Wells Fargo.
Three changes stand out: First, the massive shift of resources from employees to shareholders; second, the decline in the share going to taxes, the federal income tax rate on corporations having fallen from 52 percent in 1960 to 21 percent in 2019. Third, the fact that three of the six companies did not retain any income for reinvestment in projects like R&D in 2019, while all had devoted considerable resources to that in 1960.
Some of the highlights, or lowlights, of Wartzman’s discoveries: Amex spent 43 percent of its revenues on its 10,000 employees in 1960, and just 12.6 percent on its 64,000 in 2019, with the percentage going to shareholders doubling over that time, and a major share going to “other expenses,” which could well mean workers under contract, usually lower-paid and without benefits.
Chrysler devoted 27 percent of its 1960 revenues to its 105,000 employees, and just 10.5 percent to its 192,000 employees in 2019, while the share going to holders of Chrysler stock increased seven-fold. The pressures presented by non-union automakers in the South and imports from lower-wage countries greatly weakened the United Auto Workers over the ensuing 60 years, which clearly is a major factor in the falling employee share.
Union Pacific Railroad had almost an identical number of employees in 2019 as it had it 1960, but the share of company revenues they received plummeted from 47 percent in 1960 to 21 percent in 2019.The share going to stockholders, by contrast, rose from 7 percent to 39 percent. The amount going to reinvestment (new equipment, R&D, etc.) fell from 6 percent to -11 percent (that’s negative 11 percent).
As more Americans traveled by air, the number of United Airlines employees rose from 22,000 in 1960 to 96,000 in 2019. The share of revenues going to employees, however, dropped from 47 percent to 21 percent over that time, while that going to shareholders rose from 7 percent to 39 percent, with a decline in reinvestment identical to that at Union Pacific.
Employment at Wells Fargo similarly ballooned, from 5,700 in 1960 to 260,000 in 2019 – that is, the bank had 45 employees in the latter year for every 1 it had in the former. With such a massive increase in the number of employees, the share of revenues going to them also increased, but only by a bare 6 percentage points (28 percent to 34 percent). The percent going to shareholders, however, rose from 7 percent to 31 percent.
U.S Steel presents a different tale, as the domestic steel industry brutally contracted in the face of foreign competition and lower-wage non-union domestic production as well. Moreover, technological innovation increased productivity: a decade ago, the company’s then-CEO (John Surma) told me that it took just two workers to turn out the same volume of steel that had required ten workers in previous decades—which, of course, diminished the number of employees. The company’s number of employees in 1960, 225,000, had shrunk to a bare 28,000 in 2019, with the share of revenues going to employees shrinking correspondingly from 46 percent to 22 percent. The share going to stockholders held steady, while the great increase came in “other expenses”—perhaps to pensions that the United Steelworkers had won for its retirees, who greatly outnumber the current workforce. U.S. Steel, then, is a clear exception to the pattern seen in the other five companies, but it’s the company’s overall downward trajectory that sets it apart.
Like Tolstoy’s unhappy families, each company had its distinct set of circumstances – foreign and non-union competition at Chrysler, the great mortgage bust at Wells Fargo (for which the bank itself was massively culpable), declining use of rail for Union Pacific. But the common denominator is the rise in the percentage of revenues going to shareholders. The 1982 decision of Ronald Reagan’s appointees on the SEC to allow share buybacks and the subsequent linking of CEO pay to share value played no small role in the increase of corporate revenues going to shareholders, while the declining rate of unionization – still close to one-third of the private sector workforce in 1960, to an abysmal 6 percent today – diminished worker’s power to demand fair wages across the entire economy.
If you want some hitherto unknown particulars on the extent and roots of our stratospheric economic inequality, these two surveys will satisfy your curiosity and appall your social and moral sense.
