Behind The Mic With Joe Mathieu: Companies Sitting On Cash
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BOSTON (CBS) – You know the old saying, “you’ve got to spend money to make money.”
Well since the recession hit five years ago executives at major corporations have not followed that advice. They instead cut spending and squeezed more out of their workers to send profits ever higher while sitting on a big pile of cash.
A pile that keeps growing.
Research from the Progressive Policy Institute, first reported by USA Today, finds companies have held-off on spending more than $2 trillion since the economy turned lower in 2008. A half-trillion of that was just last year.
That’s good for the boss who gets a bonus. It’s also good for shareholders who get higher returns in the market. But it’s not so good for you.
In fact this lack of capital spending by companies means lower productivity, slower growth, and yes, lower wages.
Indeed, real wages in this country are still lower than they were five years ago. And the average chief executive of a major corporation made more than 270 times as much as the average worker last year, according to a study by the Economic Policy Institute.
But that gap could begin to close if executives start spending money. It’s Economics 101 – increased investment leads to higher productivity, higher profits and eventually higher wages.
Which reminds me of another old line, “you can’t cut your way to prosperity.”
Follow Joe on Twitter @joemathieuwbz