Stock Buybacks Are the Wrong Target
— February 26, 2019
By A. Michael Spence
The debate kicked into high gear recently when US Senators Bernie Sanders and Chuck Schumer wrote an article arguing that corporations should be investing more in employees and the community, rather than buying back stock. They then declared their intention to introduce legislation that would prohibit corporations from buying back their own stock unless they invest in workers first, say, by raising their minimum wage to $15 per hour or offering paid sick leave.
Sanders and Schumer – and many others – are concerned that surpluses or rents are being allocated entirely to shareholders, who tend already to be among the top 10% of income earners. At a time of rising inequality and stagnant wages, investing more of that money in lower-earning workers seems a better option than lavishing more wealth on the wealthy.
Read the full Project Syndicate article.
A. Michael Spence is a William R. Berkley Professor in Economics & Business.