The Buyback Boondoggle is Beggaring America

Robert Reich

Robert Reich Former U.S. Secretary of Labor, Professor at Berkeley

Trump and Republicans branded their huge corporate tax cut as a way to make American corporations more profitable so they’d invest in more and better jobs. 

But they’re buying back their stock instead. Now that the new corporate tax cut is pumping up profits, buybacks are on track to hit a record $800 billion this year. 

For years, corporations have spent most of their profits on buying back their own shares of stock, instead of increasing the wages of their employees, whose hard work creates these profits. 

Stock buybacks should be illegal, as they were before 1983.

Stock buybacks are artificial efforts to interfere in the so-called “free market” to prop up stock prices. Because they create an artificial demand, they force stock prices above their natural level. With fewer shares in circulation, each remaining share is worth more.     

Buybacks don’t create more or better jobs. Money spent on buybacks isn’t invested in new equipment, or research and development, or factories, or wages. It doesn’t build a company. Buybacks don’t grow the American economy.

So why are buybacks so popular with Corporate CEOs?

Because a bigger and bigger portion of CEO pay has been in stocks and stock options, rather than cash. So when share prices go up, executives reap a bonanza. The value of their pay from previous years also rises – in what amounts to a retroactive (and off the books) pay increase on top of their already outrageous compensation.

Buybacks were illegal until Ronald Reagan made them legal in 1982, just about the same time wages stopped rising for most Americans. Before then, a bigger percentage corporate profits went into increasing workers’ wages. 

But since corporations were already using their profits for stock buybacks, there is no reason to believe they’ll use their tax windfall on anything other than more stock buybacks.

Let’s not compound the error. Make stock buybacks illegal, as they were before 1982.

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Reposted from Robert Reich's website.

Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, Aftershock: The Next Economy and America’s Future, is now in bookstores. His earlier book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.RobertReich.org.

Posted In: Allied Approaches

Union Matters

Uber Drivers Deserve Legal Rights and Protections

By Kathleen Mackey
USW Intern

In an advisory memo released May 14, the U.S. labor board general counsel’s office stated that Uber drivers are not employees for the purposes of federal labor laws.

Their stance holds that workers for companies like Uber are not included in federal protections for workplace organizing activities, which means the labor board is effectively denying Uber drivers the benefits of forming or joining unions.

Simply stating that Uber drivers are just gig workers does not suddenly undo the unjust working conditions that all workers potentially face, such as wage theft, dangerous working conditions and  job insecurity. These challenges are ever-present, only now Uber drivers are facing them without the protection or resources they deserve. 

The labor board’s May statement even seems to contradict an Obama-era National Labor Relations Board (NLRB) ruling that couriers for Postmates, a job very similar to Uber drivers’, are legal employees.

However, the Department of Labor has now stated that such gig workers are simply independent contractors, meaning that they are not entitled to minimum wages or overtime pay.

While being unable to unionize limits these workers’ ability to fight for improved pay and working conditions, independent contractors can still make strides forward by organizing, explained executive director of New York Taxi Workers Alliance Bhairavi Desai.

“We can’t depend solely on the law or the courts to stop worker exploitation. We can only rely on the steadfast militancy of workers who are rising up everywhere,” Desai said in a statement. 

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