Above photo: Chipotle restaurant workers fill orders for customers on April 27, 2015 in Miami, Florida. Joe Raedle/Getty Images).
Why don’t low wage workers earn more?
Because their bosses plowed $522 million into manipulating their stock price—and CEO paychecks—instead.
Most people believe in fair pay for honest work. So why aren’t low-wage workers better paid?
After 30 years of research, I can tell you that it’s not because employers don’t have the cash — it’s because profitable corporations spend that money on their stock prices and CEOs instead.
Lowe’s, for example, spent $43 billion buying back its own stock over the past five years. With that sum, the chain could have given each of its 285,000 employees a $30,000 bonus every year. Instead, half of Lowe’s workers make less than $33,000. Meanwhile, CEO Marvin Ellison raked in $18 million in 2023.
The company also plowed nearly five times as much cash into buybacks as it invested in long-term capital expenditures like store improvements and technology upgrades over the past five years.
Lowe’s ranks as an extreme example, but pumping up CEO pay at the expense of workers and long-term investment is actually the norm among America’s leading low-wage corporations.
In my latest “Executive Excess” report for the Institute for Policy Studies, I found that the 100 S&P 500 firms with the lowest median wages — the “Low-Wage 100” — blew $522 billion on buybacks over the past five years. Nearly half of these companies spent more on this once-illegal maneuver than they spent investing in their long-term competitiveness.
This is a scam to inflate CEO pay, pure and simple.
When companies repurchase their own shares, they artificially boost share prices and the value of the stock-based compensation that makes up about 80% of CEO pay. The SEC found that CEOs regularly time the sale of their personal stock holdings to cash in on the price surge that typically follows a buyback announcement.
I also looked into what these corporations contribute to employee retirement — and found that it’s peanuts, compared to their buyback outlays. The 20 largest low-wage employers spent nine times more on buybacks than on worker retirement contributions over the past five years.
Many of these firms boast of their “generous” matching benefits, typically a dollar-for-dollar match of 401(k) contributions up to 4% of salary. But matching is meaningless for workers who earn so little they can’t afford to set anything aside.
Chipotle, for example, spent over $2 billion on stock buybacks over the past five years—48 times more than it contributed to employee retirement plans. Meanwhile, 92% of eligible Chipotle workers have zero balances in their 401(k)s. That’s hardly surprising, since the chain’s median annual pay is just $16,595.
The conclusion is unmistakable: CEOs are focused on short-term windfalls for themselves and wealthy shareholders rather than on long-term prosperity for their workers — or their companies.
As United Auto Workers President Shawn Fain put it in his Democratic National Convention speech: “Corporate greed turns blue-collar blood, sweat, and tears into Wall Street stock buybacks and CEO jackpots.” Public outrage over CEO shakedowns helped the UAW win strong new contracts last year with the Big Three automakers.
Support for policy solutions is growing as well. The Democratic Party platform calls for quadrupling the 1% federal tax on stock buybacks. And a recent poll shows strong majority support among Democrats, Republicans, and Independents alike for proposed tax hikes on corporations with huge CEO-worker pay gaps.
Extreme inequality isn’t inevitable — and it can be reversed.
Forty years ago, CEO pay was only about 40 times higher than worker pay — not several hundreds of times higher, as is typical today. And just 20 years ago, most big companies spent very little on stock buybacks. At Lowe’s, for example, buyback outlays between 2000 and 2004 were exactly zero.
Corporate America’s perverse fixation on enriching those at the top is bad for workers and bad for the economy. With pressure from below, we can change that.