Blodget Asks a Taboo Question on Wages and Profits

I like this Henry Blodget thought experiment on how much more major companies could afford to compensate their ill-paid employees. It shows pretty clearly just how much shareholders and executives benefit at the expense of the workers who make their profits possible.

First, consider the macro context: Something has definitely changed in how workers are paid and how capital is paid. Blodget pulls these two charts, which show the portion of the economy going toward corporate profits has soared:

While the portion going to wages has plunged.

This is no coincidence.

So Blodget uses three consumer giants to put familiar corporate faces on this phenomenon:

DEAR WALMART, MCDONALD’S AND STARBUCKS: How Do You Feel About Paying Your Employees So Little That Most Of Them Are Poor?

I’ve given Business Insider a hard time on occasion for its sensationalism, but I can’t deny that sometimes the formula works. That headline there contains a good question, no, that gets to the heart of the matter better than Ye Olde Newspaperese.

Blodget notes that the three giants raked in $35 billion in operating profit between them last year and that giving each of their roughly 3 million combined employees a $5,000 raise would still leave them with about $20 billion in operating profit.

So companies have plenty of room to pay their employees more, if only they choose to do so.

Right now, these companies are not choosing to do so. They’re choosing to pay their employees nearly as little as possible—wages that, in many case, leave the employees below the poverty line.

You hardly ever see this kind of thing in the business press, needless to say. It’s focused disproportionately on the perspectives of management and owners.

You also almost never see this kind of thing:

A century or two ago, many of the manufacturing jobs in the economy paid extremely low wages, and the work was done in dangerous, unhealthy environments. Then workers began negotiating collectively, and wages and working conditions improved.

Walmart, with its viciously anti-union stance (that includes closing stores where workers successfully organize), is emblematic of the decline of organized labor, which has, also not coincidentally, occurred while wages have fallen.

Of course, whether companies should pay their workers more is a matter of opinion. But whether they could is not, and it’s important to ask it, not only because it informs the former, but because that question is almost never raised in the business press.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,