We had a discussion about McDonalds and the minimum wage in the USA a few weeks ago. I just found out something interesting. McD’s spends on the order of $6 billion a year buying back it’s own shares. That’s a significant amount of money - if you imagine that McD’s has about 760,000 workers in the USA and about 1.7 million globally - McD’s could cancel the share buyback program and give each worker in the USA an extra $10K a year in salary, or if they shared the money globally they could give each worker an extra $4K a year. That change could be made without affecting the basic profitability of the business or the cost of the food in the restaurant.
The effect of the share buyback is to create scarcity and to push up the price of the remaining shares, which are held by the company execs. The remaining shareholders make capital gains on the value of their own investments when they buy back shares.
Specifically, it ought to be illegal, or it ought to incur punitive taxation for any company to be buying their own shares when 80% of their workforce is on minimum wage and in receipt of federal benefits such as SNAP or housing assistance. The federal government is in effect supplementing the income of low-paid workers due to the large sums of money spent on share buyback - it’s tax dollars subsidising a program that benefits the executives.
