Record Corporate Profits and Dividends: A Growing Disparity Between Corporate Wealth and Worker Wages
The business landscape of the United States is witnessing unprecedented growth, with US-based corporations reporting record profits. This upward trend has significantly impacted investors, contributing to the more than 10% increase in the S&P 500 index this year. A large portion of these profits is being redistributed to shareholders through dividends and stock buybacks.
According to data from the CME Group, the total dividend payouts from companies in the S&P 500 reached a new record of $612 billion in 2023, with further growth projected for 2024. This financial success is largely due to the combined net profits of the 200 largest publicly-traded US corporations, which reached a staggering $1.25 trillion in 2022. This represents a 63% increase since 2018.
A significant portion of these profits, around $1.1 trillion, was returned to shareholders through dividends and stock buybacks. However, this financial success comes with a growing disparity between corporate profits and worker wages.
Oxfam International, an anti-poverty organization, recently published a report highlighting this issue. The study revealed that while profits soared for these corporations, CEO pay increased by nearly 30% since 2018. For some companies, the average CEO-to-worker pay ratio surpassed 1,500 to 1. Furthermore, only ten of these 200 companies have publicly committed to paying a living wage.
The practice of stock buybacks has been a contentious issue, with critics arguing that they allow executives to manipulate markets while prioritizing corporate profits over workers’ wages. By preventing or restricting share repurchases, these critics believe that corporations could invest more in growth and raise wages. However, supporters argue that buybacks efficiently distribute excess capital and increase demand for the stock, boosting earnings per share.
Additionally, Oxfam’s report emphasized that this growing wealth disparity also reinforces gender and racial inequality in the workplace, particularly in sectors like retail. This sector, which is the most demographically diverse in the country, had the lowest median salaries out of any industry in 2022.
Moreover, US corporations have managed to avoid high tax rates through various legal methods, according to recent analyses from the Institute for Policy Studies and Americans for Tax Fairness. These organizations found that some large US companies earned more money between 2018 and 2022 than their businesses paid in federal taxes.
President Joe Biden’s 2025 budget proposals include plans to tax the wealthiest Americans, targeting those with more than $100 million in wealth. Biden believes that no billionaire should pay a lower tax rate than teachers, sanitation workers, or nurses.
Amidst these growing concerns over wealth inequality and corporate profits, Trump Media & Technology Group recently announced the completion of its merger with Digital World Acquisition Corp., granting former President Donald Trump a significant financial windfall. Despite the market’s overvaluation of the company, given its fundamentals, and declining user base for Truth Social, trading under the ticker symbol “DJT” on the Nasdaq Stock Market is set to begin on Tuesday.
Meanwhile, Boeing CEO Dave Calhoun announced his intent to leave the company by the end of the year following a series of safety and quality issues that have caused significant damage to the beleaguered corporation. Boeing has faced numerous problems with its airplanes, including two fatal crashes of the 737 Max in 2018 and 2019 that killed 346 people, as well as a door plug that blew out of an Alaska Airlines 737 Max in January. These issues have led to multiple safety groundings and cumulative losses of over $31 billion.
