Winston Churchill famously said, “The inherent vice of capitalism is the unequal sharing of blessings.” As a corollary, he is also reported to have said, “Democracy is the worst form of government except for all the others.” While he apparently said the later, some believe he didn’t invent the catchy saying, but no doubt he made it famous.
There is no debate over the wealth gap, the increasing wealth disparity among Americans. The data is pretty straight forward. Billionaires got considerably richer during the pandemic. In the middle of the 20th century, the ratio of CEO to workers compensation on average was 25:1. Today that ratio is 320:1. According to Lynn Forester de Rothschild, founder of the Coalition for Inclusive Capitalism, the current CEO to worker compensation ratio approaches that of the late 19th century, in what Mark Twain named the “Gilded Age.” This was a period when concentrations of wealth led to the “Robber Baron” fortunes of the Rockefellers, Carnegies and Vanderbilts.
Ms. Forester de Rothschild, a multimillionaire in her own right (full disclosure, I’ve met her on several occasions in my previous life), goes on to say in a recent New York Times interview that at the time of the 2008 financial crisis and now the Covid-19 crisis, “government came to the aid of the wealthiest. Some have called it ‘socialism for the rich, and capitalism for everyone else.” It’s quite an astonishing statement from a woman who married into the ultra-rich de Rothschild banking family of European renown.
What keeps hard-driving capitalism from creating laboring-class poverty that has triggered Karl Marx, among others, from predictions of inevitable revolution by the laboring class is government regulation and intervention. For such interventions, think Social Security, OSHA, child labor laws, the FDA and progressive taxation policies. But now, coming out of the pandemic, the marketplace has also been playing a major role, as evidenced by what’s happening with wage and compensation dynamics in the competition for workers.
COVID-19 has changed the face of the American economy. Amazon is up. Sears and Roebuck is gone. Work from home is up unless you are a low-wage worker, and large populated corporate headquarters are downsizing. There are more job openings than the unemployed, but employers are having trouble hiring. We’re still down over 7 million jobs from the pre-pandemic economy. Wage and compensation issues are at the vanguard of the economy’s renewal. Reality has set in. Minimum-wage salaries don’t even cover the costs of food, rent and childcare for families. Endless lines of nice cars at food banks was one of the most incredible eyeopeners of this past year. The bipartisan passage of the Affordable Care Act was a sign that government thought its citizens needed help.
Now there is clear evidence that the marketplace is kicking in. Attempts to raise the federal minimum wage ($7.25) have failed to get past Congress, but guess what? In the fierce competition to hire people and get the economy moving again, the likes of Walmart, Under Amour, Bank of America, McDonald’s, Costco, Chipotle and Kroger, among many others, are doubling down on that minimum wage and paying signing bonuses to get the workers they desperately need for this new economy.
According to the American Trucking Association, the turnover rate of long-haul truckers this quarter was 95%. That’s right, 95%! Why? Because there’s such demand for drivers that companies’ compensation rates are skyrocketing and that’s caused drivers to bounce from company to company, according to Daniel Walton, a 47-year old truck driver for Roehl Transport in Wisconsin. “Drivers appreciate the increased pay, but they’re keeping an eye on what’s being offered elsewhere. Everybody loves getting more money,” said Walton. “You hear numbers thrown at you, there is a temptation to go elsewhere.” Recently he had one friend go to Walmart, another to FedEx, which have more regular routes and time at home for their drivers.
Walmart is the nation’s largest employer, so their policies and strategies moving forward are worth examining. Walmart has its own private trucking fleet and pays its drivers extremely well. The average full-time driver with Walmart earns about $86,000 per year and works 5.5 days a week. Walmart’s benefits include medical, dental, vision, pharmacy and life insurance. Drivers also have the opportunity to enroll in a 401(k) plan and a stock purchase plan. Walmart’s private fleet has one of the lowest turnover rates in the country and for good reason.
One Walmart driver, Robert Sullivan, said, “They even dry-clean your clothes. They dry-clean my shirt and jacket. They even dry-clean my jeans.” Walmart is well aware of the fact that staying ahead of the pay and compensation curve works well in competitive hiring and retention. Downward pressure on minimum wages does not.
But there’s a dark side to all of this business of the emerging new economy, hiring battles, and competitive livable wages, and it’s reflective of the rough and tumble of capitalism. Many small businesses can’t compete with Walmart, Bank of America and McDonald’s when it comes to the compensation wars. It’s easy to assert that government should stay out of the minimum wage business, but if you’re a small business owner, who do you complain to when the free market pushes up wages, vacation times, stock options, free day care, and dry cleaning for your blue jeans?
The average annual pay for top chief executives in 2019 was $21.3 million dollars. The federal minimum wage is currently $7.25. Something has to change to avoid calamity. Walmart, Amazon and Bank of America will no doubt survive. Working class families and small businesses are on the cusp.
Ms. De Rothschild closed her interview with The Times this way, and I think it makes sense and is evidenced by what our leading companies seem to be doing. “I think that a lot of what it will take to change behavior is a moral and ethical reawakening. It’s not just one policy, it’s not just taxes, it’s not just reforming labor laws — all of which are important, and we need competent ethical people to do it. The Chamber of Commerce and the Business Roundtable are going to go for tax policy and trade policy as their primary objective. But the core of it has to come from common decency.”
Bill Sims is a Hillsboro resident, retired president of the Denver Council on Foreign Relations, an author and runs a small farm in Berrysville with his wife. He is a former educator, executive and foundation president.