Should Firms Share the Wealth With Workers?

Companies don’t have any general moral obligation to pay more than the market dictates, but it often makes good business sense.

Q: I’ve read that the total profits of U.S. corporations recently hit their all-time highest share of the nation’s annual output—somewhere between 11% and 14% of gross domestic product. At the same time, the share going to labor has fallen to a five- or six-decade low (62% of GDP for total compensation, including benefits, or 44% for cash wages and salaries). This suggests to me that business has the ability—and moral obligation—to start restoring some of the pay and benefits that were slashed in the Great Recession. What do you think?

I agree, but with plenty of caveats. Many businesses have not recovered to their normal levels of sales and profits, and they are appropriately cautious about whether their improved situations will last. And even corporations now enjoying record profits are understandably conflicted about how to deploy their retained earnings: Invest them in internal growth, buy other firms, or reward shareholders with stock buybacks and higher dividends.

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Knight Kiplinger
Editor Emeritus, Kiplinger

Knight came to Kiplinger in 1983, after 13 years in daily newspaper journalism, the last six as Washington bureau chief of the Ottaway Newspapers division of Dow Jones. A frequent speaker before business audiences, he has appeared on NPR, CNN, Fox and CNBC, among other networks. Knight contributes to the weekly Kiplinger Letter.