Corporate Profits of Low-Wage Employers
America’s low-wage economy is marked by two extremes. On the one hand, workers earning at or near the minimum wage are seeing the real value of their paychecks diminish steadily over time, as the cost of living increases while their wages remain stagnant. After nearly half a century of neglect, today’s federal minimum wage of $7.25 per hour is decades out of date. In terms of purchasing power, its value is 30 percent lower today than it was in 1968.
On the other hand, many corporations are posting record-breaking profits. The Wall Street Journal reported earlier this year that, after sinking from 2007 to 2009, corporate profits had successfully caught up to their pre-recession peak by the beginning of 2010 – and that by the third quarter of 2011, total profits for U.S. corporations reached a new record high of $1.97 trillion.
This report examines the connection between these opposing extremes of stagnant wages and soaring corporate profits. While a great deal of attention has been directed at the role of Wall Street and the financial sector in driving economic inequality in the U.S., it is important to recognize that the top low-wage employers also bear responsibility for the growing disparity between corporate profits and worker compensation.
The central finding of this report is that the majority of America’s lowest-paid workers are employed by large corporations, not small businesses, and that most of the largest low-wage employers have recovered from the recession and are in a strong financial position.
* The majority (66 percent) of low-wage workers are not employed by small businesses, but rather by large corporations with over 100 employees;
* The 50 largest employers of low-wage workers have largely recovered from the recession and most are in strong financial positions: 92 percent were profitable last year; 78 percent have been profitable for the last three years; 75 percent have higher revenues now than before the recession; 73 percent have higher cash holdings; and 63 percent have higher operating margins (a measure of profitability).
* Top executive compensation averaged $9.4 million last year at these firms, and they have returned $174.8 billion to shareholders in dividends or share buybacks over the past five years.
Three years after the official end of the Great Recession, the U.S. continues to face a dual-crisis of stagnant wages and sluggish job growth. Critics argue that a higher minimum wage will discourage companies from hiring, and that most low-wage employers are small businesses that are still struggling in a weak economy. In fact, this report demonstrates that the majority of low-wage workers are employed by large corporations, most of which are enjoying strong profits.
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