The Great Decoupling of Corporate Profits From Jobs
Second-quarter earnings reports are coming in, and they're making
So with all this money and profit, they'll start hiring again, right? Wrong -- for three reasons.
First, lots of their profits are coming from their overseas operations. So that's where they're investing and expanding production.
GM now sells more cars in
GM isn't just hiring low-tech assembly workers in
You and I and other American taxpayers still own over 60 percent of GM. We bought GM to save GM jobs, remember?
GM officials say no American taxpayer money is being used to expand in
Second, big U.S. businesses are investing their cash in labor-saving technologies. This boosts their productivity but not their payrolls.
For example, Ford reported a
The firm is already more than two-thirds of the way to equaling its record 1999 profits. But due to labor-saving technologies, Ford now has half as many employees as it did a decade ago.
Finally, corporations are using their pile of money to pay dividends to their shareholders and buy back their own stock -- thereby pushing up share prices.
Recently, GE announced it would raise its dividend by 20 percent and reinstate its share-buyback plan. It's GE's first dividend increase since the company cut its dividend in early 2009. As a result, GE shares were up more than 5 percent in the past few days.
Bottom line: Higher corporate profits no longer lead to higher employment. We're witnessing a great decoupling of company profits from jobs.
The next supply-side economist who tells you companies need more incentive (i.e., lower taxes) before they'll hire is living on another planet.
The reality is this: Big American companies may never rehire large numbers of workers. And they won't even begin to think about hiring until they know American consumers will buy their products. The problem is, American consumers won't start buying against until they know they have reliable paychecks.
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The Great Decoupling of Corporate Profits From Jobs
(c) 2010 Robert Reich