Share The Profits

In America, business is doing well. Investors are doing well. And workers, for decades, have gained almost nothing. There is a very simple solution: share the profits.

Say you are one of the millions of Americans who work for a major corporation. It could be Apple or Amazon or Walmart or Exxon or Disney. You could be an engineer or a warehouse worker or a sales clerk or a gas station attendant or a person who dresses up in a Mickey Mouse costume. Here is the big picture of the economy, as it pertains to you: In the past decade, the value of major American stocks has more than doubled. The people who invest in your company have made great gains. Corporate profits are high. The average CEO of a major American company makes, by one measure, 347 times the salary of the average worker. Forty years ago, they made around 30 times your salary. During that same period of time, your wages have stayed essentially flat, even as your productivity at work has greatly increased.

Everyone involved in your company is making money except for you, the worker.

There are a few possible responses to this unjust and economically untenable situation. One is to ignore it, and pretend that the growth of the overall economy is helping everyone, even when in fact, measurably, objectively, it is mostly helping the very wealthy. This is the Republican approach—call it the “Rising Tide Lifts All Boats Lie.” The sort of people who are the investors and corporate executives, who do reap the gains, and who vote Republican are happy to allow this state of affairs to persist as long as possible.

Another response is a bloody populist uprising, from the right or left, as generalized rage against the death of the American dream is poured out at targets both justified and unjustified, smashing and burning and destroying with unpredictable consequences for all. That’s a possibility. But there are better ways to deal with this, before the Molotov cocktails come out.

What we have is a distribution problem. There is plenty of money being made. Don’t let anyone tell you otherwise. (If anyone tells you otherwise, ask to see their personal bank account balance.) That money is just not going to you. And you are the majority. And you are also doing the actual work. To remedy this, companies could just raise wages, so that the wages of workers would once again rise along with productivity, as they did for decades before the bargaining power of the working class fell apart in the 1970s. This would mean substantial raises for everyone. This would be fair, but it would also very plainly mean less for the rich and more for you. The rich are unlikely to want to do this, based on their past behavior.

Another popular method, more beloved by some parts of corporate America, is to give their employees stock. This, to some extent, aligns the fortunes of the worker with the fortunes of the company. It allows you to share in the rise of the company’s value. But there are a few problems with this method: 1) You are unlikely to be given enough stock to make a true difference in your economic status, unlike the company’s executives; 2) For people who are not rich enough to have well-diversified investment portfolios, holding a lot of stock in one company is actually a risky and unwise decision—just ask Enron employees; and 3) The price of your company’s stock is an imperfect reflection of what you, the worker, deserve, and the productivity gains you have made. Stock prices sometimes rise greatly, but they also fall just as sharply, based on factors both macroeconomic and psychological. For average people—who, again, do not have a cushion of wealth to allow them to easily weather the ups and downs of the stock market—simple grants of stock are not enough to fill the hole of stagnant wages that has been slowly dug for our entire lifetimes.

So here’s a much more straightforward idea: Share the profits. Your company makes a certain amount of profit every year. Take a percentage of that and give it to the workers. A hefty percentage. When your company has a good year, you get a substantial bonus. This bonus is not subject to the whims of your boss, or the predations of short-selling hedge funds targeting your stock price. Is a direct percentage of profits. And that percentage is large enough to make a meaningful financial impact for the average worker. This is a true, direct, alignment of economic interests between company and employee.

Corporate executives and investors may object that peeling off a chunk of profits for employees will hurt the growth of the stock price. Good. This sort of profit sharing is nothing but a realignment of the flow of money to make it more fair. Corporate executives and investors themselves do little else but peel off their own chunk of corporate earnings every year, and do everything they can to insulate that stream of money from the ups and downs of the business cycle. I can assure you that simple profit sharing for workers is far more fair than the way your CEO gets paid. If corporate executives and investors had spent the past 40 years ensuring that your wages kept pace with the growth of the company and the economy as a whole, we wouldn’t be having this conversation. They didn’t. Instead, they looked out for themselves, and got rich, while you did not. Forced profit sharing is a basic way to begin to remedy this. It’s not as good as, say, forcibly removing 60% of the wealth of the top 1% and redistributing it downwards. But it’s a start.

It would be great if such meaningful profit sharing was a basic feature of the American corporate landscape. It’s not, and it never will be, as long as companies are worried about pleasing investors more than workers. But it’s not just a pipe dream. There’s a very realistic way to achieve this at your own company: get it in a union contract. All of this inequality is driven in large part by the decline of unions, which killed the bargaining power of workers like you, allowing the executives of your company to take the money it used to give to you and keep it for themselves. It’s not more complicated than that. If workers use collective bargaining to get themselves leverage, they can ask for profit sharing. If corporate America scoffs at the idea, let them try running their businesses without workers.

Inequality will be remedied one percentage point at a time.