I was watching CNN one morning last week and the lead story was the big jump in hiring just reported by the government. The Trump administration was quick to attribute this to its huge corporate tax cut and deregulation of industry. But what really struck me was the comment by the CNN business reporter. The really good news, she said, was that wages remained flat, which would delight Wall Street. What typically happens in tight labor markets — companies pay higher wages to attract scarce workers — hadn’t happened. In essence she was saying that robust hiring in the previous month was good news, but the much better news was that corporate profits will grow because companies didn’t pay more to working stiffs. Does this sound slightly sick to you? It does to me. The stock market loves stagnant or, even better, declining wages. I know this isn’t a revelation but doesn’t it merit some debate?


An article in the Harvard Business Review (“Why Wages Aren’t Growing in America,” Oct. 24, 2017) by Jay Shambaugh and Ryan Nunn said real wages (that is, wages adjusted for inflation) have been stagnant since the early 1970s, growing only 0.2 percent per year. According to the article, a number of factors keep wages low over time, including international trade, technological progress, and slack labor markets like the one brought on by The Great Recession of 2008.


As most of you know too well, our powerful economic engine has worked extremely well for the top 10 percent, but not at all well for the bottom 50 percent over the past 50 years. If you doubt that, please go back and re-read my post entitled “Income inequality in the United States: What’s all the fuss about?”


It might sound like hyperbole to say the economy is rigged for the rich and against the poor, but that’s what the data show. As Christians, we must un-rig the system so that wage earners share more broadly in the wealth our economy creates.


Yet the opposite is happening. We’re not making the system fairer, as two examples illustrate: The Trump Administration’s recent tax cut and a case before the U.S. Supreme Court. I’ll deal only with the first example in this post and save the second for later.


Trump brags that the cut in corporate income taxes is the largest in history. And, sadly, he is correct. Indeed, the tax cut will help corporations. But will it do anything significant to better the lot of the wage earner over the long-term?  Certainly not. While bonuses handed out to workers by several large publicly-owned companies generated lots of good press for the administration, the bonuses probably were one-shot deals. They may or may not ever be repeated. A few companies also increased their starting minimum wage. USA Today reported that 39 of the companies in the S&P 500 made bonus payments or gave raises to employees, attributing them to the largesse resulting from the tax cut,  (Jan. 28, 2018).


Here’s the breakdown of what those companies did with their windfall:

  • 24 paid bonuses ranging from $500 to $3,000 (only one company paid the latter amount), with the majority paying $1,000.
  • 4 paid bonuses in company stock.
  • 8 actually increased wages for certain employees.
  • 3 increased their contributions to employees’ 401Ks this year.


Since I often pick on Walmart, let’s look at what the country’s largest employer did with its $1.85 billion annual windfall. Walmart gave $1,000 bonuses to 40,000 employees who had 20 years of service and smaller amounts to employees with fewer years.


So you say to yourself, “Wow, that’s great! Walmart has gotten religion!” Not so fast. Walmart has 1.4 million employees in the U.S. and 800,000 abroad. 1.8 percent of them received $1,000 bonuses. Why did so few receive the maximum $1,000 bonuses? Because the requirements were restrictive. You had to be full-time, but only about half of Walmart wage earners are. And you had to have worked for Walmart for at least 20 years. So the $1,000 bonuses cost Walmart about $40 million. By comparison, Walmart CEO Doug McMillon and his three executive vice presidents earned more than $52 million last year,  and there’s every reason to believe they will make more this year.

The inequity is even more stark because the payments probably are a one-off event — there’s been no promise to repeat them in the future. By contrast, the company is guaranteed that its windfall from the tax cut will continue well into the future — $1.85 billion every year at the company’s current profit rate.


CEO McMillon credited the Trump Administration’s tax cuts for making the bonuses and wage increases possible. But Walmart could have done a lot better for its employees. I don’t think that it’s cynical to suggest the company devised a way to share as little of its newfound profits as possible with its employees, yet still get some good PR. It is a fact, not conjecture, that the majority of Walmart’s workers still live in poverty. The real beneficiaries of the tax cut, to the tune of billions of dollars, have the same last name —  Walton. And they happen to be the richest family in the country.


Finally, I refer you to an editorial in The New York Times’ on Feb. 26, 2018,  entitled “A Tax Cut Bonanza, for Investors.” You can read it at the link below, but here’s the final paragraph:


“There was a legitimate argument for reforming the tax code in a way that reduced the corporate tax rate, closed loopholes and  made the economy fairer and more productive. But Republicans chose a plan that rewards the rich at the expense of workers. They had to lie to make this scheme seem legitimate. Now the true effects are coming to fruition.



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About Buck Close

Deacon Buck Close serves on the staff of the Church of St. John the Evangelist in Newport, RI. He was born in South Carolina, graduated from Tulane University in 1972 with a BA in Economics and Latin American Studies.

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