The Labor Department reported today that there were 6.1 million job openings in August in its JOLTS report, or Job Openings and Labor Turnover Survey, which was “little changed” from July, while hirings remained far behind at 5.430 million. Corporations are flush with cash from record profits, so they need to put that cash to work by filling more of those job openings instead of asking for tax cuts they don’t need.
In fact, the very large gap has been little changed for more than a few months. At 652,000, the current spread between openings and hirings is one of the very widest on record, and two months ago it was even higher—the spread was 1 million.
Yes, the gap between openings and hiring first opened up about 2-1/2 years ago signaling that employers are either not willing to offer high enough pay to fill empty positions and/or are having a hard time finding people with the right skills.
It’s worse than that. I maintain companies (corporations in particular) are using their record profits (up 7.4 percent in one year) to buy back their stock, instead; which enhances CEO pay.
I reported two weeks ago that Executive Pay Watch, in a report conducted by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), said last year CEOs were paid 335 times the average worker. The average production and non-supervisory worker earned $37,600 annually in 2016. “When adjusted for inflation, the average wage has remained stagnant for 50 years,” said the report.
This brake on economic growth is mainly because corporations have been able to successfully resist their employees’ demands for higher wages due to corporations’ monopoly positions in many industries, and massive lobbies. Instead they’ve used most of those profits to buy back their stock, and so enhance their earnings. CEO pay spiked 19.6 percent last year, before inflation.
And next year may not be better for their employees. I also reported recently that “Pay raises for U.S. employees are not expected to improve next year, according to a survey released recently by global professional services company Aon, based on a survey of over 1,000 companies. Base pay is expected to rise 3 percent in 2018, up slightly from 2.9 percent in 2017. Spending on variable pay — incentives or bonuses — will be 12.5 percent of payroll, low levels not seen since 2013. This suggests a “pessimistic view of corporate performance in the coming year,” Ken Abosch, a strategy and development analyst at Aon, said in a statement.
How can corporations be pessimistic about their prospects with their record profits? They now have the largest profits as a percentage of Gross Domestic Income (a measure of total national income) in history.
It should be obvious the corporate world wants more tax breaks, so the Aon survey is suspect. Corporations are really not interested in expanding their markets—at least in the U.S. of A. They are more interested in expanding the pocketbooks of their executives and stockholders, which is why GDP growth has been below the long term average.
As Nobel economist Joseph Stiglitz has been saying for years, “…it is not as if America’s large corporations were starved for cash; they are sitting on a couple of trillion dollars. And the lack of investment is not because profits, either before or after tax, are too low; after-tax corporate profits as a share of GDP have almost tripled in the last 30 years.”
Consumers power two-thirds of economic activity, so economic growth can’t improve unless the incomes of consumers grow, and that won’t happen as long as corporations hoard their profits rather than invest in their own employees future growth.
Harlan Green © 2017
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