The companies with the most low-wage workers are spending billions on stock buybacks instead of raises

While some Americans have been looking to tighten their belts recently, U.S. corporations have been on a spending spree—but that money hasn’t been going to workers or capital improvements. Instead, the spending has boosted shareholder returns and helped send already sky-high CEO pay soaring even more.

In the past five years, all but seven of the company’s 100 largest low-wage employers have collectively spent $522 billion on stock buybacks. This is when corporations buy back their own stock, which then inflates the price of shares, which then inflates executive stock-based pay. Over that same time period, the 20 largest of these employers have spent nine times as much on stock buybacks as they have on employee retirement-plan contributions.

That’s according to the progressive think tank Institute for Policy Studies, which just released its annual Executive Excess report, a look at high levels of executive pay and how that pay affects inequality. The report focuses on what the Institute calls the “Low-Wage 100,” which are the 100 corporations from the S&P 500 with the lowest median-worker pay.

CEO-to-worker pay ratio

For these 100 companies, that annual median-worker pay ranges from $8,618 for part-time workers at Ross stores to $51,084 for a typical worker at Kleenex maker Kimberly Clark. (The Securities and Exchange Commission, or SEC, doesn’t let corporations annualize its part-time pay when disclosing their median-workers’ earnings, noting that it says something about a company’s business model if they rely on part-time labor.)

Overall in 2023, the median pay across all 100 companies averaged $34,522—up 9% from 2022. At the same time, average CEO pay has dropped slightly, from $15.3 million to $14.7 million. That puts the CEO-to-worker-pay ratio for these corporations at 538-to-1, down from last year’s 603-to-1.

That gap between what a median worker earns and what a CEO rakes in is significantly higher than what it was historically—and higher than at other companies. For the S&P 500 as a whole, the ratio is 268-to-1. In 1965, the CEO-to-typical-worker-pay ratio at the largest U.S. corporations was just 25-to-1.

Rising inflation and stagnating wages mean millions of workers are struggling. That the CEO-to-worker-pay ratio has shrunk at all, per this report, is because of intentional efforts, such as minimum-wage increases at the city and state level (though not the federal) and worker actions in the wake of the pandemic, including strong union campaigns. “Low-wage workers have fought hard to get a more fair share of the rewards of their labor,” says Sarah Anderson, who authored the report and directs the Global Economic Project at the institute, “but the gaps are still totally out of whack.”

Spending on stock buybacks over other investments

Stock buybacks contribute to that gap—and show how companies invest in CEOs and shareholders over their workers or other aspects of their business, Anderson explains. From 2019 to 2023, 47 of the “Low-Wage 100” companies spent more money on stock buybacks than on capital expenditures, meaning anything from technology investments (including cybersecurity protections) and building upgrades to new equipment.

After years of authoring this report, Anderson says she’s rarely shocked, but that finding jarred her. “It reinforces that leaders of these companies are thinking too short-term and too much about their own personal gains rather than the long-term health of the company and their own workforce,” she says. When companies invest in their own stock over their operations, it can come at the expense of safety upgrades. Companies have bought back stock before disasters like the baby formula crisis and the Norfolk Southern rail crash.

Johnson Controls, which produces smart building tech, spent $8.8 billion more on stock buybacks than on capital expenditure over the past five years. “Yet, they had this big cyberattack,” Anderson notes. A September 2023 ransomware attack cost the company $27 million. “That’s a pretty clear example of maybe they should have been investing more in their IT security instead of spending so much on stock buybacks,” she says.

Lowe’s spent $33.6 billion more on stock buybacks than on capital investing—the largest gap of the report’s companies. That’s a stark switch from how the company previously behaved; between 2000 and 2004, Lowe’s didn’t spend anything on stock buybacks.

The difference on stock-buyback spending versus worker-retirement contributions also shows where a company’s priorities lie. For retirement benefits, the report only looked at the 20 largest companies on the list, since the data was difficult to collect. Those 20 are recognizable names: AutoZone spent 92 times more on stock buybacks than employee retirement between 2019 and 2023; Chipotle spent 48 times more. Some of these companies boast retirement-matching plans—but for many workers, their pay is so low that they can’t afford to contribute anything to their retirement themselves, and so don’t benefit from matching programs.

Signs of change

Stock buybacks were illegal until Ronald Reagan legalized them in 1982. There are signs that there might be an appetite to rein them in. At the Democratic National Convention, Democrats reiterated a proposal to quadruple the stock buyback tax from 1% to 4%, as a way to encourage corporations to invest in their productivity. The 2022 CHIPS and Science Act, which invests in semiconductor production, includes a provision that companies getting such subsidies have to agree to forgo all stock buybacks for five years.

Recent union campaigns have also homed in on stock buybacks. From rail to aviation to communications, workers have called for companies to end stock buybacks and instead invest in workers.

Anderson isn’t suggesting there’s an exact trade-off, like every dollar going to stock buybacks could instead go to worker pay or benefits. But it shows what a company prioritizes. “Stock buybacks do nothing for the ordinary workers at these companies,” Anderson says. It also challenges companies’ arguments that they don’t have more money to put toward their employee compensation. “The justification for buybacks is that this is excess profits that they don’t know what else to do with.”