Profits for Fortune 500 companies rose 29 percent in 2006 to $785 billion, the highest in half a century. Median wages rose 3 percent, or $1,016 per worker.
If median wages had increased at the same rate as profits, each worker would have earned an additional $9,828 in 2006 instead of $1,016, a difference of $8,812 per worker.
The ability of the country’s largest companies to pocket huge profits instead of passing part of them on to workers through higher wages is the direct result of the decline in union strength. Only unions can provide a counterweight to the otherwise unchecked power of companies to exercise control over wages and working conditions.
The vast and growing gap between wages and profits that has occurred in the context of diminished union strength is not a one-year blip or short term event.
Fortune 500 profits rose 80 percent from 2000 to 2006. If workers’ pay had kept pace with profits over the same period, the median wage for 2006 would have been $53,914 instead of $34,892.
A two-earner family would be pulling in almost $108,000 a year instead of $69,784, a difference of about $38,000 a year.
There are only two ways to raise profits. Companies can extract more profit from each worker employed, or they can increase the number of workers employed at the same level of profit per worker.
The huge profit increase for Fortune 500 companies from 2000 to 2006 came almost entirely from extracting more money from each worker. While profits rose 80 percent from 2000 to 2006, the Fortune 500 workforce grew by only 3.6 percent.
The profit surge in 2006 was not based on selling more. Revenue growth was only 8.9 percent in 2006; profits rose more than three times faster than sales. Even if wages had simply kept pace with revenues, the median wage increase in 2006 would have been $3,013 instead of $1,016.
The size and power of the Fortune 500 today is unprecedented. Their total revenues of $9.9 trillion are equal to 74 percent of U.S. GDP. And the $785 billion in profits they collected in 2006 was just short of the entire 2006 federal budget for all discretionary spending of $843 billion.
The 2006 profits of the three largest oil companies totaled $72.2 billion, more than all 2006 federal discretionary spending for health and human services. Wal-Mart pulled in profits of $11.3 billion in 2006, equal to the budget for the U.S. Department of Labor for the entire year.
Although the Fortune 500 rely on large numbers of women and minority workers, 97 percent of the CEOs who run these companies are white men.
The power of the Fortune 500 can only be met by the power of workers uniting in the workplace and bargaining to reset the relationship between wages and profits for all workers.
Greg Tarpinian is the Executive Director of Change to Win.
