Celebrants of the recent tax bill have claimed, echoing Trump’s top economic advisors, that the massive corporate tax cut will indeed trickle down or, to mix metaphors, serve as the proverbial rising tide that will lift all boats.
CNBC’s Patti Domm was quick to validate this exuberant claim, pointing to announcements from Wells Fargo and Fifth Third bank that they will be raising their minimum wage to fifteen dollars per hour and from AT&T and Comcast that they will be showering their employees with bonuses. Other reporting on CNBC suggest it’s too early to tell, as many companies Fred Imbert and others reached out to hoping to forecast the impact of the corporate tax cut were more reticent about how this tax windfall will trickle down to employees, adopting a wait-and-see attitude.
Before we get too exuberant, let’s keep in mind not just recent history but also the longer arc of history in terms of the relationship between corporate profits and wages as well as the most basic dynamics of capitalism. The bottom line of capitalist dynamics is that higher corporate profits do not translate into higher wages. Indeed, higher profits have typically been achieved through lowering workers’ wages and benefits.
First, recent history: Remember when Trump lavishly offered up seven million dollars of taxpayer money to the Carrier corporation in order, supposedly, to persuade Carrier not to re-locate factories and jobs to Mexico? Trump generated a self-aggrandizing headline, but Carrier ended up still moving jobs to Mexico and eliminating over 600 jobs from the Indiana workforce.
That’s one reason not to get prematurely rapturous about corporate trickle down.
Another reason to be skeptical about corporate windfalls translating into rising wages is that since the 1950s we have seen corporations fare better and better while worker wages, including the minimum wage, have stagnated. Indeed, last March, well before the passage of this tax cut, The Economist reported, as part of its cover story, that corporate profits in the United States were in fact enjoying record performance.
So, given this record corporate performance in terms of profit generation, we should have already seen corporations raising wages, expending monies in capital and infrastructure investment, and showering generous bonuses on its employees.
If this scenario happened, I guess I missed it. Unfortunately, I didn’t miss it. It just didn’t happen.
And it likely won’t.
Indeed, at a meeting of the Wall Street Journal’s CEO council in early November, Gary Cohn asked CEO’s to raise their hands if the GOP tax cut proposed at the time would spur their companies to invest more and raise wages. In a moment Business Insider termed “awkward,” few CEO’s raised their hands, reinforcing the reporting of CNBC’s Fred Imbert.
These are not left-wing anti-capitalist ideologues doing this reporting. These are business journalists.
And these business journalists are just reporting the facts validated by the history of capitalism’s dynamics. The end game of corporate behavior is to increase profits, not to give money away charitably because they have it. In fact, corporations often push to lower wages and benefits to increase profits. They aren’t looking for any reason to raise wages.
Are we really supposed to be buying this bill of goods capitalist President Trump and the corporate bedfellows with which he has staffed his cabinet and advisors are trying to sell us?
They know full well how capitalism works. And corporations raising wages because profits and income increase ain’t how it works, and it never has been.
Take Trump himself. Recently Trump’s Mar-a-Lago resort requested and was awarded 70 H-2B visas to hire foreign workers. According to Trump, John Bowden at The Hill reported, “It’s very, very hard to get people. Other hotels do the exact same thing.”
Really? Is that why Bowden also cited CareerSource spokesmen Tom Veenstra as highlighting, “We currently have 5,136 qualified candidates in Palm Beach County for various hospitality positions listed in the Employ Florida state jobs database.”
Free-market advocates typically oppose minimum-wage legislation, believing that the market should determine wages. Capitalists understand that corporate profits don’t determine wages but rather the dynamics of labor supply and demand do.
In the case of Mar-a-Lago’s hiring practices, Trump’s resort is deliberately trying to undermine the forces that raise worker wages by bringing in foreign workers—because that’s how capitalism works. Corporations, like Carrier and Trump’s businesses, seek to pay the lowest wages possible.
So, if history is any indicator, as it typically is, the dynamics of capitalism won’t change, such that we cannot expect increased corporate profits and income to translate to better treatment and higher pay for workers.
Such a scenario would defy the logic of capitalism, as Carrier and Mar-a-Lago demonstrate. And our capitalist President, his cronies, and the Republican Congress are simply lying about this reality of which they in their wealth are well-aware.
Tim Libretti is a professor of U.S. literature and culture at a state university in Chicago. A long-time progressive voice, he has published many academic and journalistic articles on culture, class, race, gender, and politics, for which he has received awards from the Working Class Studies Association, the International Labor Communications Association, the National Federation of Press Women, and the Illinois Woman’s Press Association.