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Pfizer Jacks Up Drug Costs, Pays Billions to Stockholders

Prescription Prices Ver5

Photo by Chris Potter via Flickr

Ever wonder why prescription drug costs are so high? Take a few minutes and read Bill Lazonick’s piece on Pfizer.

From January 2001 through September 2015, Pfizer paid out [to stockholders] $95.5 billion in buybacks and $87.1 billion in dividends.

That’s $182.6 billion paid to stockholders… compared to $37.1 billion paid in corporate taxes over the same time frame. Do the math. That’s almost five times more money paid to stockholders than paid in taxes.

Now, stop and think about this. Why are stockholders getting all that money? When shares are bought and sold on the stock exchange, none of that money goes back to the corporation. Instead, the money goes to the previous owner of the stock – who may have owned that stock for less than a second. (Read more about “high frequency trading” here.)

And yet, most corporations pay lots of money to their stockholders. For what? Passing stock from one owner to another isn’t investing in the corporation’s future. So far in 2015, Pfizer has paid more than twice as much to stockholders as it has invested in R&D.

Why are stockholders getting all that money?

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tieby Unsplash via PixabayPaying money to stockholders benefits corporate executives who are “paid for performance.” (How this works, using Verizon as a case study, is a previous NHLN post.) In the case of Pfizer’s CEO, “75% of his long-term equity awards are earned based on relative and absolute total shareholder return.” In other words, the CEO’s compensation depends on Pfizer paying money to shareholders. If stockholders don’t get enough money, the CEO doesn’t get that compensation. And it’s not just the CEO. All of Pfizer’s top corporate executives are paid according to whether they meet “shareholder return” targets.

Back to Bill Lazonick’s piece:

In 2014, [Ian C.] Read as [Pfizer] CEO had total direct compensation of $22.6 million, of which 27 percent came from exercising stock options and 50 percent from the vesting of stock awards. The other four highest-paid executives named on Pfizer’s 2015 proxy statement averaged $8.0 million, with 24 percent from stock options and 41 percent from stock awards.

Remember, a good chunk of that compensation was based on the amount of money paid to stockholders. Which probably explains why Pfizer is paying so much more to stockholders than it’s spending on R&D.

— — — —

dollar by TBIT via PixabayWhere does all that money come from, anyway?

From Bloomberg:

Pfizer Inc., the nation’s biggest drugmaker, has raised prices on 133 of its brand-name products in the U.S. this year, according to research from UBS, more than three-quarters of which added up to hikes of 10 percent or more. … In a note Friday, analysts at Morgan Stanley said Pfizer’s net prices grew 11 percent a year on average from 2012 to 2014.

The Wall Street Journal documented Pfizer’s three-year market research campaign to decide the price of a new breast cancer drug.

“[I]ts process yielded a price that bore little relation to the drug industry’s oft-cited justification for its prices, the cost of research and development. … Staff members put together a chart estimating the revenue and prescription numbers at various prices… The chart showed a 25% drop in doctors’ willingness to prescribe the new drug if it cost more than $10,000 a month.”

Two years ago, AARP investigated the pricing strategy for another Pfizer drug, with an expiring patent:

[T]he manufacturer of the popular anti-cholesterol drug Lipitor employed an unusually aggressive strategy — including a pay-for-delay agreement, a coupon program, and a substantial price increase — to try to maintain revenue and market share after Lipitor’s patent expired. … Several major U.S. retailers have filed lawsuits against Pfizer and Ranbaxy that accuse them of violating antitrust laws by striking a deal that kept generic versions of Lipitor off the market… Pfizer’s chief executive reported that they maintained three times more market share than what is traditionally seen when blockbusters lose patent protection, “add(ing) hundreds of millions of dollars of profitability to the company.”

And a bunch of Pfizer’s profits come from government spending. There isn’t a lot of available research into government spending on pharmaceuticals, but what I’ve found is enlightening. As of 2010, Pfizer’s Lipitor – in varying strengths – represented three of the top-20 drugs prescribed under both Medicare and Department of Defense health programs. As of 2003, Medicaid was spending almost $650 million a year just on Lipitor.

That’s a lot of taxpayer money going to Pfizer.  While the corporation is paying twice as much to shareholders as it’s spending on R&D. While it’s paying five times as much to shareholders as it’s spending on corporate taxes. While Pfizer is trying to use the US corporate tax rate to justify off-shoring profits through a merger with Allergan.

While Pfizer’s CEO is receiving millions in compensation based on the amount of money the corporation pays to stockholders.

— — — —

hands by Gaertringen via PixabayAnd where else does that money come from?

If you have family or friends on Medicare, you probably know that the price of prescription drug coverage is going up significantly next year – even though there will be no Social Security COLA.

If you’re a State of New Hampshire retiree, you know that your cost of drug coverage is going up significantly next year – even though there hasn’t been a retirement COLA for the past six years.

The billions being paid to Pfizer stockholders are coming out of a lot of pockets… including the pockets of people who are spending their “golden years” choosing between medicine and food.

One more time: why are stockholders getting all that money? What have they done to deserve it?

This Thanksgiving: How To Talk About The Economy Without Getting Into An Argument

man yelling with megaphone

Is your family one of those families… where Thanksgiving dinner always ends up in a political argument?

First thing to remember is that arguing won’t get you anywhere. Research shows that when the people you’re talking with hold strong beliefs, arguing with them only makes it harder for them to change those beliefs. And “when people’s confidence in their beliefs is shaken, they become stronger advocates for those beliefs. … when faced with doubt, people shout even louder.”

Political scientists call it the “backfire” effect – and if you’re an activist, you need to know about it (and remember it). Also remember that there are neurological differences between “Republican” and “Democratic” brains… and there are behavioral differences… although scientists are still trying to figure out exactly what those differences mean.

no_megaphoneSo what are you supposed to do? If you’re, say, sitting around the Thanksgiving table when Great Uncle Chester starts berating your college-graduate niece about the fact that she’s living at home rather than in her own apartment…?

Start by finding common ground. There’s always something to agree on, if you just look hard enough. Even if it’s just a gentle restatement of what the other person said. “Yes, Uncle Chester, we all agree that college graduates should be able to find jobs that allow them to support themselves.”

Then, add a little reality in there. “But that doesn’t seem to be happening in the current economy. There are a whole lot of twenty-somethings who are still living at home.”

Try to use personal examples rather than just facts. “I remember what my neighbor’s son went through, when he graduated two years ago. It took him 18 months to find a job, and even then he earned barely enough for him to make his student loan payments.”

When you talk about facts, try to frame them as a question, not a statement. “Don’t you think that the economy has changed from when you graduated college? Remember how working in a bank used to be a highly-respected job? Did you know that, these days, almost one-third of bank tellers need food stamps?”

Don’t push too hard. With Uncle Chester, you might not be able to persuade him of anything other than that he should stop berating your niece. (And if you push any further, the conversation might get loud and become a “nobody’s going to win this” argument.)

But continue the conversation, if your audience seems receptive. “Did you know that, these days, banks are paying billions of dollars to stockholders, rather than paying their tellers a decent wage?”

— — — —

no_megaphoneDo you have a second cousin Mildred who insists that “cutting taxes for job creators” is the answer to everything?

Find something you both agree on. “Nobody likes paying taxes.”

Add a personal story. “I remember when we got President Bush’s ‘tax refund checks’ back in 2001 and 2008. It was nice to get the money, but I didn’t invest it. I don’t know anybody who invested it. Most people either kept the money in the bank or used it to pay down debt.”

Then, a little reality. “Did you know that Congress has been cutting taxes on ‘job creators’ since Ronald Reagan was President? Back then, they used to call it ‘supply side economics.’ But it didn’t fix the economy; all it did was create a huge budget deficit. So after a few years President Reagan gave up on the idea and increased taxes again.”

Is Mildred still listening? If she looks interested, rather than angry, give her a few more facts. “Did you know that corporations are spending literally trillions of dollars buying back their own stock? Rather than building new factories or hiring new employees, they’re buying back shares of their own stock in order to keep stock prices high.”

Is she still listening? “And corporations are even borrowing money – bonds they will be paying back for decades – in order to give money to their stockholders now. So I don’t think CEOs would really invest money from tax cuts in ‘job creation.’ Don’t you think they would just pay it out to stockholders?”

Is she still listening? “I wonder what would happen to our tax rates, if corporations were paying taxes at the same rate they used to, before the SEC started allowing companies to buy back their own stock. Don’t you think that we might be paying less in taxes?”

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no_megaphoneDo you have a brother-in-law who isn’t bothered by increasing inequality? Who thinks CEOs actually deserve to receive 373 times as much as their employees are paid?

Then you ought to read this Pacific-Standard magazine article about a recent International Monetary Fund report.

And you can start the conversation with something like, “We all agree that economic growth is a good thing.”

Then add a little reality. “Did you know that income inequality actually hurts our country’s economic growth?”

Add a story. “Gosh, I wonder if this is why Macy’s is having such a hard time. None of my friends are planning to do their Christmas shopping there.   It seems like everybody is shopping discount stores or making their gifts, this year.”

Use questions. “How can the economy recover, if ordinary people don’t have money to spend? Did you know that one in ten American jobs is in retail? What’s going to happen to that sector of the economy if wages stay stagnant?  What’s going to happen to the rest of the economy?”

Know your audience, and either stop (before things get loud) or keep going. “Did you know that increasing the income share to the bottom 20% – even just by a tiny bit – helps the whole economy grow?”  “Do you think that’s why the economy grew more, back when income was a bit more equal?”

— — — —

no_megaphoneAnd if the conversation turns to the Trans-Pacific Partnership (TPP) treaty… please be thoughtful and careful about what you say.

Personally, I’m tired of politicians pitting people against each other. And factory employees in Singapore are working to feed their families, just like we are.

The problem with the TPP isn’t overseas workers, it’s how much power the treaty would give to corporations. It’s how much power the treaty would give to big banks. It’s the idea of America giving up our right to enforce our laws, when those laws are inconvenient to multinational corporations. It’s the idea of turning over even more of our country’s sovereignty to international “investor-state dispute settlement” (ISDS) tribunals.  Read more about how the TPP empowers corporations on the Public Citizen website.

So please, if you’re opposing the TPP, don’t talk about how overseas workers are taking “our” jobs. The real problem is how much it will benefit corporations.

The real problem is that corporate profits are at all-time highs… while labor’s share of that bounty is pretty close to its all-time low.

And the TPP is likely to make that problem worse, not better.

But that’s not the fault of the migrant workers in a Malaysian electronics factory.

— — — —

Happy Thanksgiving! I hope the conversation around your dinner table is a peaceful one.

— — — —

no_fearBut if the conversation turns to Paris and Syrian refugees, please be especially careful. Fear is one of the most basic human emotions… it’s also one of the most destructive… and one of the easiest to manipulate.

Journalist Naomi Klein is the author of “The Shock Doctrine: The Rise of Disaster Capitalism.” She’s done a lot of research into how corporatists use disasters to push through political change. Read her work about the aftermath of Hurricane Katrina here.

“For more than three decades, [economist Milton] Friedman and his powerful followers had been perfecting this very strategy: waiting for a major crisis, then selling off pieces of the state to private players while citizens were still reeling from the shock, then quickly making the ‘reforms’ permanent. In one of his most influential essays, Friedman articulated contemporary capitalism’s core tactical nostrum, what I have come to understand as the shock doctrine. He observed that ‘only a crisis— actual or perceived—produces real change.’ ”

I think of her work every time someone mentions the Bush tax cuts. Back in 2001, the federal government had a budget surplus; and in the first few weeks of September, the Washington Post did a poll that found 57% of Americans wanted the Bush tax cuts reversed, in order to preserve that surplus. Then 9/11 happened. And a decade and a half later, we still haven’t gotten tax rates restored to Clinton-era levels… and the federal debt has increased by $12.4 trillion.  (And we’re being told we need to cut Social Security, rather than restore the tax rates that President Bush cut even further “while citizens were still reeling from the shock” of 9/11.)

The Paris attacks renewed the atmosphere of fear that I remember after 9/11… and we’ve already seen how some politicians want to use that fear to change government policies. The good news is: my Facebook feed is full of people pushing back against these proposals, questioning them and using historical analogies to say “This is not what America stands for.” The bad news is: Facebook feeds are determined by an algorithm that tends to reinforce what people already believe.

So… when the conversation turns to Paris, and ISIS, remember the advice above.  Arguing isn’t going to help. You need to find some way to help the people you’re talking with step away from their fear, and step into the reality that their fear allows them to be manipulated. Find something to say that you both agree on – most people agree that refugees should be vetted before being resettled – and work from there.

Leo W Gerard: Retirement Insecurity for Workers — Decadent Pensions for CEOs

Workers received a terrifying message last week, one far more bone-chilling than Halloween ghouls or Freddie Krueger. It was this: Retirement security is only for CEOs, not for workers.

Two sources delivered this frightening news. One was a dozen Republican presidential candidates insisting during last week’s debate that Social Security be slashed. The other was a new report detailing how corporations killed worker pension plans while simultaneously gilding CEO retirement accounts.

There’s a simple explanation for this ill-treatment of the vast majority. It results from the persistent demand by CEOs and other 1 percenters that all wealth get deposited in their pockets. That means grotesquely fat paychecks, perks and pensions for them and no raises and no retirement for workers whose labor creates corporate profits. That means CEOs and 1 percenters paying Social Security taxes at a much lower rate than workers do, hobbling the program. The uber-wealthy get away with this because politicians, particularly Republicans, are their indentured servants. Billionaires bankroll their campaigns and get exactly what they want in return.

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Federal rules facilitate CEOs amassing pensions worth hundreds of millions of dollars. Workers can’t contribute more than $24,000 a year to their 401(k) retirement plans, but corporations can stash unlimited cash in special CEO retirement accounts– and then get a tax break for doing it!

A report issued last week by the Center for Effective Government and the Institute for Policy Studies details the disparity in CEO and worker pension treatment. Titled “A Tale of Two Retirements,” it notes that the 100 largest CEO retirement funds are worth a combined $4.9 billion. That equals the entire old-age savings of 41 percent of all American families.

These 100 CEOs have awarded themselves the same amount of pension money that116 million Americans have scrimped and saved for retirement.

Among those 100 high rollers, the guy with the most mammoth retirement account is David Novak, who moved this year from CEO of YUM Brands to executive chairman. YUM, which owns the low-wage restaurant chains Taco Bell, Pizza Hut and KFC, handed Novak a $234 million pension.

For Novak, that’s a pension check totaling $1.3 million every month until the day he dies. A million a month!

In the meantime, YUM stopped providing pensions to new hires in 2001 and owes its workers’ pension fund $310 million.

This is typical corporate misconduct. YUM poured $234 million into Novak’s retirement fund. But the corporation just can’t seem to find the $310 million in owes the pension account for thousands of its dedicated workers.

The guy whose pension ranks number five on the list is John H. Hammergren, CEO of McKesson. The corporation has handed him a $145.5 million pension fund, which means he can collect $819,243 a month.

Though that’s less than what YUM gave Novak, McKesson bested YUM in one area. It denied pensions to new hires beginning in 1996, five years before YUM did.

Hammergren, whose average annual pay is $50 million, was a new hire at McKessonin 1996. Though he wasn’t named CEO until years later, clearly, he got himself a special exemption from that no-pension for new hires rule. CEOs don’t follow the rules.

Then there’s Marilyn Hewson, the female CEO with the largest pension account. Lockheed Martin deposited $60 million in her retirement fund, enough to give her a monthly check totaling $341,649.

Hewson’s corporation eliminated pensions for newly hired salaried workers in 2006and newly hired union workers in 2012. Then, last year, it announced that it would begin freezing the pensions of 48,000 salaried workers starting in 2016.

That’s retirement luxury for CEO Marilyn Hewson; retirement poverty for Lockheed Martin workers.

While corporations stash more and more in the accounts of CEOs like Hewson, they’ve slashed more and more from workers, like those whose labor makes profits for Lockheed Martin. In the early 1990s, 35 percent of private sector workers received a defined benefit pension plan at work. Now it’s 18 percent. Today, nearly half of all workers have no access at all to any retirement plan at work, no defined benefit pension, no 401(k). Those with a 401(k) have paltry savings, an average of $18,433, only enough to provide a retirement check of $104 a month – somewhat less than Novak’s $1.3 million a month.

Because so many corporations have decided only CEOs need pensions, a huge portion of the nation’s elderly relies heavily on Social Security. For 24 percent of the approximately 40 million senior citizens who receive Social Security, it is the sole source of retirement income.

It amounts to $1,335 a month, about $16,000 a year, barely enough to pay for food, shelter and health care.

Yet Republicans running for President want to cut it. Or they want Americans to work longer before getting it. Sen. Ted Cruz, Sen. Rand Paul and Gov. Chris Christie have all said Americans should be forced to work past age 65. They’re demanding 66-year-old roofers and carpenters and iron workers continue to carry heavy loads and climb scaffolds and ladders. They’re just fine with 66-year-old tire builders and steelworkers and refinery workers being forced to stand all day operating body-battering machines.

At the debate last week, Sen. Marco Rubio said he’d protect Social Security for his mother but not for younger people. Former Hewlett-Packard CEO Carly Fiorina, who left the company with a $40 million golden parachute when she was fired, said thegovernment should do nothing to help workers.

Sure. She was fine with the government giving Hewlett-Packard tax breaks that padded her pay and pension. Now that she’s got her $40 million, she thinks the government should do absolutely nothing for working people’s pensions or for the 40 million Americans who depend on Social Security.

The obvious fix for Social Security is to require the wealthy to pay the tax on all of their income, just as middle class and low-wage workers do. As it is now, the rich pay the tax only on the first $118,500 they earn.  They don’t pay a cent of the tax on the rest. No matter how many millions they pull down.

The obvious fix for pensions is to require corporations to provide for workers the same kind of benefits they gift wrap for top executives and to end the exclusive tax breaks given CEO pensions.

Fiorina and other fat cat CEOs believe they’re special and shouldn’t have to follow the same rules or pay the same taxes as workers. American workers will continue to suffer retirement insecurity until they stop electing politicians who are indentured servants to 1 percenters and CEOs like Fiorina.

 

Leo W Gerard: There’s Always Money for the Boss

Businesses always find big bucks for the boss. He wants a raise; he gets it. No problem. For workers whose sweat of the brow produces profits, well, somehow there’s never a cent for them.

In fact, last week when President Obama proposed making more workers eligible for overtime pay, fat cats and CEO sycophants expressed abject horror that companies may have to pay employees more when they work more.

No way could they pay, they protested! The proposed rule would bankrupt America, they raged. It’s not humanly possible, they fumed, for corporations that pad CEO paychecks with millions in bonuses to also manage to pay time and a half when workers labor more than 40 hours a week. Can’t be done, they cried! Well, except that it has been done since 1938.

Fix Overtime Image

That’s when the Fair Labor Standards Act passed. It created the 40-hour work week and overtime rules. It required that businesses pay time and a half to all hourly workers for each hour of labor after 40 in a week. It also required employers to pay time and a half to all salaried workers who were not highly compensated professionals, executives or administrators.

President Obama proposed setting the salary threshold under which employers would have to pay overtime to salaried workers at $50,440 a year. Taking inflation into account, that is the level at which it was set in 1975.

Somehow, corporations managed to pay time and a half for overtime worked by employees in that salary range in 1975. Maybe those CEOs were smarter than today’s crew caterwauling that they can’t do it.

President Obama estimated that 5 million workers would benefit from increasing the threshold. What that really means is that right now, corporations are cheating 5 million workers out of overtime pay they deserve because they labor more than 40 hours. These are salaried workers, so corporations can demand 50, 60, even 70 hours a week out of them for not a cent in additional compensation.

Though inflation rose each year in the 40 since 1975, the threshold was raised only once in that time. That was in 2004, during the Bush administration, so of course it was a paltry increase. The threshold now stands at $23,660, moribund for 11 years. The result is that only 8 percent of full-time salaried workers qualify for overtime. Even under the proposed rule, not even half ­– 40 percent – would qualify.

Still, highly profitable corporations are complaining. The National Retail Federation, the group that opposes all minimum wage increases, said “there’s no magic pot of money,” from which to pay overtime.

There is, however, always a big fat magic pot load of money to pay CEOs.

In 1965, CEOs at the nation’s 350 largest public firms made 20 times the pay of a typical worker employed by those companies. After the 1970s, however, worker pay stalled while CEO pay supersized. Since 1979, the compensation of the top 1 percentgrew 138 percent while the wages of the bottom 90 percent rose just 15 percent. Now those CEOs get 300 times the typical worker’s pay. CEOs at the top 350 companies in 2013 pulled down an average of $15.2 million a year, up 21.7 percent since 2010.

CEOs have long argued that they are so great and so valuable and so special that they deserve to get in a day what a worker earns in a year. But a 2013 report by the Institute for Policy Studies smacks that down. The researchers found that nearly 40 percent of the highest paid CEOs over the past 20 years were eventually bailed out, booted or busted.

That is, taxpayers came to the rescue of their companies, corporate boards fired the CEOs or investigators charged them.

Even when CEOs mess up, they clean up. For example, when Hewlett-Packard fired Carly Fiorina as CEO, she walked away with a golden parachute worth $40 millionand left behind a corporation hobbled by an ill-advised merger and plunging stock value. There were no golden parachutes for the 30,000 workers she laid off.

CEOs contended their corporations are too poor to pay overtime, but on their next quarterly call with shareholders, they’ll brag about record profits.

In 2013, corporate profits were at their highest level in 85 years. But workers whose labor created those bonanzas didn’t benefit. That same year, employee compensation was at its lowest level in 65 years.

And it’s not getting any better. Average hourly earnings continued to remain flat in May.  While the unemployment rate has steadily declined and the stock market climbed to new heights, corporations have failed to respond by raising wages for workers.

They’ve also failed to reward productivity. For three decades after World War II, hourly compensation for the vast majority of workers grew at a rate very close to productivity growth. But from 1973 to 2013, pay for the typical worker rose just 9 percent while productivity increased 74 percent.

Overtime explains part of that discrepancy. As an increasing number of salaried employees worked overtime and businesses paid them nothing at all for it, their productivity increased and corporations took all of the benefits from that.

In announcing the proposed overtime rule, President Obama said, “We’ve got to keep making sure hard work is rewarded. Right now too many Americans are working long days for less pay than they deserve . . . Let’s commit to an economy that rewards hard work, generates rising incomes, and allows everyone to share in the prosperity of a growing America . . . That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay.”

That’s exactly right. Businesses lavish CEOs with fat paychecks and perks whether they do a good job or not. A well-run firm could find money to properly compensate employees who devote extra hours to ensure the place keeps humming.

PayWatch.Org Highlights Growing Inequality Between CEO’s And Workers

2015 Executive PayWatch highlights Walmart at center of growing inequality crisis

www.PayWatch.org

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(Washington, DC)As Americans rally behind a robust raising wages agenda for working families, CEO pay for major U.S. companies has skyrocketed. According to the new AFL-CIO Executive PayWatch, CEO pay increased nearly 16 percent in 2014.

The Executive Paywatch website, the most comprehensive searchable online database which tracks CEO pay, showed that in 2014, the average production and nonsupervisory worker earned approximately $36,000 per year, while S&P 500 company CEO pay averaged $13.5 million per year – a ratio which has grown to 373-to-1.

“America faces an income inequality crisis because corporate CEOs have taken the raising wages agenda and applied it only to themselves,” said AFL-CIO President Richard Trumka. “Big corporations spend freely on executive perks and powerful lobbyists to strip rights from workers, but when it comes to lifting up the wages of workers that make their companies run, they’re nowhere to be found. Too often workers are seen as costs to be cut, rather than assets to be invested in. Americans deserve better from those who have earned so much off the backs of working men and women, and we must start by adding transparency to the CEO pay process and requiring companies disclose their CEO-to-median employee pay ratios.”

Mega-retailer Walmart, highlighted in this year’s PayWatch, represents one of the most egregious examples of CEO-to-worker pay inequality. CEO Douglas McMillon, the nation’s largest employer, earns $9,323 an hour compared to $9 for a beginning employee salary. A new employee would have to work for 1036 hours just to equal the pay McMillon earns in one hour. PayWatch also highlights the wealth of the six Walton family members who have more wealth than 43 percent of America’s families combined.

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“In 2013, I earned about $12,000 as a full-time employee, which at Walmart isn’t always 40 hours each week,” said Tiffany, a former Walmart worker who has worked in both Maryland and Louisiana for the company. “These poverty wages force my family to receive public assistance. Walmart doesn’t value me. I believe in working hard and that my work should be valued. This is why I will not stop fighting until Walmart commits to raising wages and begins valuing all of its workers.”

More information about Walmart’s massive CEO-to-worker pay disparity and inequality among S&P 500 companies can be found at www.paywatch.org.

What would YOU do with $707 billion?

WWYD_707_billionGoldman Sachs just weighed in with their predictions for next year’s economy. They expect “only a modest growth in business investment”… but a whopping increase in the amount of money corporations will spend buying back their own stock.

(Corporations buy back their own stock to increase per-share prices.  Many CEOs get paid more, if the price of their company’s stock rises.  And most CEOs receive at least some of their compensation as stock or stock options.  Either way, increasing the stock price increases how much $$$ the CEO takes home.)

Next year, Goldman Sachs analysts expect corporations to spend a total of $707 billion buying back their own stock.

What else could Corporate America do with that money?

  • Companies could create about nine million $50,000 jobs – with benefits!  (Wait… isn’t “nine million” the number of people who are unemployed in America, right now?)
  • Companies could “afford” to increase the wages of the 3.3 million minimum-wage workers in America. (Most minimum wage employees work 34 hours or less at their primary job… calculating that as 5.8 billion minimum-wage work-hours a year… would mean that all those workers could get a $122/hour increase!  Yeah, that was “one hundred twenty-two dollars an hour”… do the math yourself.)
  • It could pay for the Food Stamp program — for almost an entire decade. (Which only seems fair, since nearly three-quarters of families receiving public assistance are working families who don’t get paid enough to make ends meet. And it doesn’t matter how profitable the industry is: almost one-third of all bank tellers are on public assistance; more than half of all fast-food workers; thousands upon thousands of workers in other industries.)

But apparently Corporate America isn’t going to be doing anything like that, with that $707 billion. Not creating jobs. Not increasing wages. Not giving up the taxpayer subsidies for their low-wage jobs.

No, Goldman Sachs expects Corporate America to spend that money just… buying back shares of stock.

Which doesn’t really create value. It’s not a new factory, or a new product, or even a new market. All stock buybacks do is concentrate corporate ownership. Like ultra-concentrated dish soap: it’s the same stuff, just in a smaller bottle.

And yes, this does have advantages if you’re looking at things from the CEO’s perspective.

All too often stock buybacks are deceptive things, which create a sugar high in the share price, a nice little windfall for management, and pretty much nothing in the way of actual value creation.

But looking at that $707 billion from the perspective of the 99%…?

  • In a stack of $100 bills… that same money would be about 480 miles high.
  • You could buy enough ultra-concentrated dish soap to fill about 75,000 Olympic-sized swimming pools.

… and from the perspective of the 99%, either of those options would probably be just as good as spending all that $$$ on stock buybacks.

Have a better idea about how to spend $707 billion? Use our comments section to share it.

Read “Nightmare on Wall Street? Are Stock Buybacks Creating Another ‘Financial Bubble?’” here.

Read “Why the Economy Doesn’t Work for the 99%: Massive Payouts to Corporate Stockholders” here.

 

Taxpayers Are Paying Profitable Corporations To Create Jobs?

Toyota GT86 – Frontansicht, 17. September 2012, DüsseldorfWhen word first spread that Toyota was moving jobs from California to Texas, some right-wing talking heads were blaming California’s government.

But within a day, the Wall Street Journal had figured it out: it was actually Texas’ government.  Yes, the newspaper owned by Rupert Murdoch broke the story: Texas to Pay $10,000 for Each Toyota Job

Texas offered Toyota $40 million to move, part of a Texas Enterprise Fund incentive program run out of the governor’s office. At $10,000 a job, it was one of the largest incentives handed out in the decade-old program and cost more per job created than any other large award. Last year, Texas spent about $6,800 to lure each of 1,700 Chevron Corp. positions to Houston and $5,800 for each of 3,600 Apple Inc. jobs shifted to Austin.

Ok, so… let me see if I can get this straight.

Toyota just had a second year of record profits.

Toyota wasn’t actively considering locating in Texas.  “Toyota narrowed its preferred locations to Denver, Atlanta and Charlotte, N.C.” before choosing to move to Texas because of the economic incentives.

$10,000 a job.  Courtesy of Texas taxpayers.

Gosh, it’s a good time to be a corporation.

OK, I need to give the Wall Street Journal some credit here: they have been working the “state economic incentives for jobs” beat for a while now.  From their 2013 story about Washington state’s genuflection to Boeing:

Officials from most of the states Boeing invited to participate have publicly expressed interest. Missouri’s governor, Democrat Jay Nixon, on Tuesday is to sign a package of incentives approved last week by the state’s largely Republican legislature. The measure would be worth $150 million annually to Boeing if the company creates at least 2,000 jobs in Missouri.

Ok, by my math: $150 million a year divided by 2,000 jobs equals $75,000 per job per year… which would have been courtesy of Missouri taxpayers.

Back to their story:

Washington’s legislature last month approved sweeteners valued at $8.7 billion over 16 years—which experts say is the largest corporate-incentive package in U.S. history—in an effort to keep the jobs

And, back to my math: $8.7 billion over 16 years is about $544 million a year – or, more than three times what Missouri offered.

If we’re still talking about 2,000 jobs… that’s about $272,000 per job per year, courtesy of Washington state taxpayers.

Wow.

(Boeing, by the way, just distributed $3 billion as dividends and stock buy-backs.)

Yes, this is what has been going on, all across America.  Billions of dollars in government aid to corporations, even as Congress cut the Food Stamp program and rejected an increase in the minimum wage.

It’s a really good time to be a corporation.

Or a CEO.

Or a lobbyist.

(But not such a good time to be a US veteran.  More than a million veterans are minimum-wage workers who won’t see their pay increase.  And another million veterans just had their Food Stamp allotments cut.  Where are our priorities?)

CEOs Paid 331 Times Average Worker, 774 Times Minimum Wage Worker

Executive Pay Watch

2014 Executive PayWatch exposes high paid CEOs in the low wage economy

www.PayWatch.org

While Congress has left for recess failing to fully address economic issues from the minimum wage to unemployment insurance and equal pay, AFL-CIO President Richard Trumka unveiled the 2014 Executive PayWatch today. According to its data, U.S. CEOs – the highest paid in the world – pocketed, on average, $11.7 million in 2013 compared to the average worker who earned $35,293. That means CEOs were paid 331 times that of the average worker.

Many of the CEOs highlighted in PayWatch head companies, like Walmart, that are notorious for paying low wages. In 2013, CEOs made 774 times more than those who work for minimum wage. And while many of these companies argue that they can’t afford to raise wages, the nation’s largest companies are earning higher profits per employee than they did five years ago. In 2013, the S&P 500 Index companies earned $41,249 in profits per employee, a 38% increase.

This year, PayWatch highlights five low wage companies through worker testimonials at Walmart, Kellogg’s, Reynolds, Darden Restaurants and T-Mobile.

“These companies are run by short-sighted business leaders, because people who earn minimum wage, for instance, can’t afford cell phones from T-Mobile or dinner at Red Lobster or the Olive Garden, both of which are owned by Darden Restaurants,” said AFL-CIO President Richard Trumka. “America’s CEOs—as exemplified by the individuals of these companies—are cannibalizing their own consumer base. It’s wrong. It’s unfair, and it’s bad economics.”

PayWatch is the most comprehensive searchable online database tracking the excessive pay of CEOs of the nation’s largest companies. It offers visitors to the website the unique ability to compare their own pay to the pay of top executives.

“CEO Executive PayWatch calls attention to the insane level of compensation for CEOs, while the workers who create those corporate profits struggle for enough money to take care of the basics,” said Trumka. “This database is relevant to every community in the country. And we’ll use this data to organize and mobilize to lift millions of workers out of poverty and to strengthen the middle class.”

Congress and Labor Call For Transparency From Corporations

SEC shield

The Securities and Exchange Commission came under fire yesterday from organized labor and members of Congress.  Both took aim at what corporations are not telling the public.

New Hampshire Congresswoman Carol Shea-Porter, along with 32 other Congressmen, sent a letter to Mary Jo White, the Chairman of the SEC. (Click here to view the full letter.)  The letter calls for new SEC rule-making for publicly traded companies to disclose CEO pay and the ratio between CEO’s and their average employee.

Over the course of my lifetime, I’ve watched American workers become more productive than ever, only to see wages remain largely stagnant. Over those same decades, CEO pay has gone through the roof, rising from 42 times the average pay of workers in 1980 to 354 times that of the average worker today,” Shea-Porter said. “In 2012, the CEO of J.C. Penney (JCP) made 1,795 times that of the average JCP employee. It’s time for publicly traded companies to report on this disparity.”

The letter notes that it is important for investors to know the salaries of chief executives at publicly traded corporations. At the same time, it is essential that these salaries be contextualized through comparison with the median employee salary at the firm. The proposed rule also reflects public concern over disparate levels of executive compensation and the need to have this information available in an understandable format.

Peter Drucker, one of the 20th century’s best-known business theorists, wrote that the ratio of CEO-to-worker pay was best kept between 20-1 and 25-1. One way to reduce without cutting CEO pay is to raise the wages of the average worker.

The 32 Members of Congress to sign the letter noted that they found no credibility in the idea that the burdens of documenting the ratio between CEO pay and median employee compensation will be too high. “Companies already track how much they spend on personnel including salary and benefits,” the letter reads. “Firms that set up advanced computers for high frequency trading or that master the concept of just-in-time inventory should be able to figure out the median salary using basic software.”

While Congress is trying to create more transparency in CEO pay, organized labor took aim at corporation’s political spending.

Richard Trumka, President of the AFL-CIO, released the following statement:

We are disappointed that the Securities and Exchange Commission is not including a rulemaking to require disclosure of corporate political spending on its regulatory agenda for 2014.  The SEC’s Division of Corporate Finance had been previously scheduled to consider whether to recommend a proposed rule in 2013.

Since the Supreme Court’s Citizens United decision, we have seen a dramatic increase in political spending by corporations.  Yet much of this spending is not disclosed to investors who own public companies.  Without transparency, there is a danger that executives will spend money in ways that do not benefit investors.

Just as labor unions are legally required to publicly disclose their political spending, public companies should be held to the same standard. Nearly 700,000 individuals have written the SEC to support this requested rulemaking. We urge SEC to put corporate political spending disclosure back on its agenda for 2014.”

Many large companies are using their profits to sway political elections and then using their newly gained political clout to push for policies that only benefit the ultra-wealthy 1%.  Manly this is benefiting the corporations CEOs, while the company is taking more from the average worker for healthcare and benefits.

In the 2012 election there was an estimated $6 Billion dollars spent campaigning.  Most of that money was funneled through ‘Super PAC’s’ that do not have to disclose their donors.  Corporations donate millions of dollars to support candidates that will roll back workers rights and labor laws that greatly impact large employers.

We need more transparency from these corporations.  How is their money being used to influence the political process and how much they shell out to their CEO’s?  If we knew some of these details it would shed some light on how easy it would be for employers to raise the wages of the workers.

Your Tax Dollars Are Subsidizing Low Wages

For years now there has been a massive political debate between the ‘free market, reduce government, end social programs’ politicians on the right and the ‘raise the minimum wage, strengthen workers rights, and bring jobs back from overseas’ politicians on the left.  Both sides stand strong on their positions — and we are caught in the middle.

Everyone is fed up with Congress right now.  Businesses do not trust the government and are hoarding their money instead of re-investing.  Citizens cannot trust Congress because they keep jumping from crisis to crisis, threating to destroy the economic recovery every 6-8 weeks.

I have found something that both sides should agree with, but they won’t.  If I told you how to lift millions of working families out of poverty AND reduce the government’s obligations for programs like welfare and food stamps, would you support that?   The answer is simply to raise the minimum wage.

Before you go running off hear me out, because like I said before: we can reduce the number of people receiving public assistance and put people on the road out of poverty.

Fast Food Workforce (1-1)

Image from NELP

Right now the federal minimum wage is $7.25.  There are a dozen states that have higher minimum wages, but the majority still go by the federal standard.  The biggest abusers of the minimum wage law are major corporations, especially fast-food corporations.  McDonald’s, Burger King, Wendy’s, and even my beloved Dunkin’ Donuts are the biggest abusers of minimum wage.  It is estimated that there are 2.25 million Americans who are working for the top 10 fast-food restaurants alone.

Increasing the minimum wage would allow these 2.25 million Americans to eventually lift themselves out of poverty. This would also boost the economy because these people would have money to spend again: money to go out for dinner, see a movie or buy a new car.  All of these things would be a benefit to our stagnant economy.  Of course we already knew that.

The people who oppose raising the minimum wage do so because they want to ‘let the free market decide’ what employers should pay workers.  Under this theory, if a starving man is willing to work for $1.00 an hour, employers should be able to pay him $1.00 an hour, right?  Wrong!

Our country has – historically – valued human life highly enough that we don’t let people starve to death.  Do the math: if a person worked for $1.00 hour, he would not be able to make enough money to feed himself.  This is where public assistance programs come in.  Welfare (TANF), food stamps (SNAP), WIC, reduced-cost school lunches and other programs provide some food to low-income people.

Those same politicians who oppose raising the minimum wage also scream that the government is giving out too much money for these types of social programs.  They are right!  But the way to reduce spending on food assistance is NOT to start starving low-income families.

Fast Food Workers public assistance (1-2)

Image from NELP

Remember those top 10 fast-food corporations that I mentioned before — the ones that employ over 2 million Americans alone?  Those corporations are supplementing their profits with your tax dollars, and I bet you did not even know it.

Last year those 10 fast-food corporations paid their workers so little that many of them had to rely on government assistance programs to survive.   Last year, that cost the U.S. taxpayers $3.8 billion dollars (that is with a B) in government assistance.  McDonald’s alone cost the taxpayers $1.2 billion dollars in government assistance programs.

Fast Food Profits adn CEO pay (1-3)

Image from NELP

Ensuring that needy families do not starve is part of being an American.  We all give a little and help those people on the bottom.  The problem is that we, the taxpayers, are subsidizing the profits of these massive corporations.   Last year these top 10 corporations made a combined $7.4 billion dollars in profit.  That means: after they paid for the buildings, the workers, the food, the free toys, promotional advertising, and stock buybacks, — they still made $7.4 billion dollars in profit.

McDonald;s led the way, raking in nearly $5.4 billion in profits just for that one company.

Meanwhile, today it became clear that McDonald’s actually SENDS its workers to public assistance programs, rather than paying them a fair wage.

So I am paying more in taxes to help feed the ever growing population of working poor, while their employers are making billions in profits.   That does not seem right to me.  As I said before we can reduce the number of people who are living in poverty and reduce the output of money from government assistance programs by doing one simple thing.  RAISE THE MINIMUM WAGE.

By raising the minimum wage, people will have their own money to buy food and housing — and they wouldn’t be forced to rely on taxpayer-funded social programs.  It is a win for liberals and tea-partiers alike.

(References to the images from the National Employment Law Project)

Related Posts:

66% of Low Wage Workers Work In Large Companies Who Are Making Tons Of Money!

The Outrageous Truth About A $12 Minimum Wage And Your Grocery Bill.

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