This post is part four in the Great Paycheque Killers series. It is the final post in the series.
In the previous posts, we covered three key tactics monopolists use to keep wages down, forcing employees to sign a non-compete clause and using anti-poaching policies. The last post looked at how Capitalists destroyed the ability of workers to get their rights.
In this last post, we take it back to the ultimate structure of the Corporation and how premier access to the capital markets and use of the corporate form enables the channelling of funds to investors, instead of workers.
#1 How do corporations kill the wage?
The 2020 Congressional report that investigated tech monopolies, citing the Economist, found that:
“Amazon warehouses also have a tendency to depress wages when they enter a local labor market. For example, since Amazon opened a warehouse in Lexington County, South Carolina in 2011, the county has seen average annual wages for warehouse workers fall more than 30%, from $47,000 to $32,000 annually.”
But how? Amazon was able to effortlessly raise $9.5 billion in debt in the first 9 months of 2020, due to its monopoly status that was financed by the capital markets by in 2000.
Walmart has a similar story. They were able to consolidate the “tens of thousands of 1950s-era stores” into just over 5,000 stores. As would be predicted, this not only consolidates the number of employers but also reduces pay. A study of 3,000 Walmart openings found that “each store caused a net decline of about 150 jobs (as competing retailers downsized and closed) and lowered total wages paid to retail workers." [Emphasis Added]
Like Amazon, Walmart also has premiere access to the capital being able to borrow +$50.6 billion.
In the pharmaceutical industry, AstraZeneca was able to pay $39 billion Alexion Pharmaceuticals by “offering Alexion shareholders $60 in cash and about $115 worth of equity per share”. This illustrates how once again that monopolies get their crown from the capital markets; not through “rugged individualism”. A small enterprise who is not listed on a stock exchange can’t simply issue currency – aka stock – to buy other companies.
How could Islam address these problems?
In Capitalism, the market does not function properly - as it would in an Islamic Economy. Why? Because the wealthy companies are allowed to amass as much capital as they want. Consequently, companies with premiere access to capital markets simply buy out the market. Wages and prices are then dictated by the large companies, not the market.
To understand the Islamic solution, we need to understand the Capitalist problem. When Delta bought out Northwest in 2008 – creating the biggest airline in the world – they didn’t need to get billions to do it. Rather, through an “all-stock transaction…Northwest stockholders will receive 1.25 Delta shares for each Northwest share they own”. Through the stock market, Delta effectively has ‘central bank like powers’ to issue “currency” to buy others.
What’s the impact on wages? Delta increased their market share from 13% to 21%. With less competition, “Delta flight attendants earn less on average ($58,341 in 2017) than their counterparts at United ($62,461), American ($62,366) or Southwest ($60,389).”
The article goes on to report that the Capitalists who own the airlines (e.g. Warren Buffet), “will get $2.5 billion to shareholders via share buybacks and dividends” [original link maintained].
Why did management “choose” to give billions of Capitalists and not to the workers?
Actually, they legally have no choice. They are instead obligated to make the Capital owners richer. For-profits to be maximized, pay to workers must be minimized - even if that means paying them less than the value they bring to the company.
As discussed in the last post, unions, worker rights, and so on, were more of a bribe to the masses to stick to Capitalism. With Communism dead, the Capitalists don’t need to pay these amounts and so they don’t.
Additionally, the stock-listed companies are designed to amass capital from investors, while minimizing any liability to the amount invested. If “the corporation” launders billions of dollars; no shareholder goes to jail. Doesn’t matter that their “shareholder value” grew due to engaging in this illegal activity.
No stock market = no mega airline to depress wages = higher wages for flight attendants.
Specifically, without a stock market Delta would not have bank-like powers. Instead, they would have to get real money to buy other airlines.
In Islam, this simply wouldn’t be possible. Partnerships have a natural limit to size due to the inherent nature of human beings that are prone to differences of opinion – even if they are the best of friends. It also alters how the wealthy interact with employees and entrepreneurs.
Furthermore, the only investment vehicle open to the wealthy is the partnership structure. They must invest in real human beings. This will also raise wages and facilitate the distribution of wealth. There is a greater potential for employees to move from unskilled workers to skilled workers. Once skilled, the worker could leave the company and start their own business with the help of outside investors. Consequently, the current owners will need to replace the worker and that new business started will likely hire additional employees. The greater demand for workers will level the playing field and, in sha Allah, will offer more equitable outcomes for both employees and employers.