How outlawing stock buybacks would protect the power gains of American workers' recent union wins

• Paul Constant is a writer at Civic Ventures and the cohost of the "Pitchfork Economics" podcast.
• He says lawmakers should protect the gains in worker power following a recent wave of union wins.
• Ending stock buybacks is a great way to do this, Constant says, as it restricts corporate power.

Union drives are seeing historic successes right now.

This month, Amazon workers at a Staten Island warehouse officially voted to become the first American Amazon facility to unionize. Amazon Labor Union leaders have said one of their major goals is to raise starting pay in the warehouse from $18 to $30 per hour. By comparison, new Amazon CEO Andy Jassey's pay package for his first year in office was recently revealed to be an eye-popping $212.7 million.

The same battle is playing out at Starbucks stores across the country, including one in the corporation's home city of Seattle and a flagship in New York City. Starbucks has said it plans to raise wages for workers to between $15 and $23 an hour this year. In contrast, the company's now-former CEO Kevin Johnson received a total compensation package of $20.43 million in 2021.

That's the modern experience for American workers in a nutshell: They're fighting to make reasonable gains that reflect their productivity at the same time that the executive class is busy raking in millions.

But even as unionization efforts grow, there's more that lawmakers can do to protect this progress and build on this moment for American workers. Most importantly, they have an opportunity to finally rein in stock buybacks.

How stock buybacks are used by corporations to return money to shareholders

Stock buybacks are the mechanism that transforms corporate profit into a no-strings-attached gift for the shareholder class. Buybacks are quite literally what they sound like: The CEO and board allocate millions, or even billions, in corporate profit to the buying back of company stocks from shareholders. Because only 14% of all Americans directly own stock, buybacks largely enrich a small number of wealthy Americans — and they're likely why some 80% of average CEO compensation is now stock-related.

Buybacks were illegal until the Reagan Administration's sweeping wave of financial deregulation in the early 1980s, and the practice has grown in popularity ever since. This year is on track to beat 2021's all-time record with a total $1 trillion in buybacks. That's a trillion dollars companies could put toward worker wages and benefits, customer retention strategies, and research and development, but instead it will be handed over to the wealthy few.

A few corporate leaders have even begun to admit that the buyback scheme has gone too far. In 2019 and 2020, Starbucks spent roughly $12 billion on stock buybacks. On April 4 when Howard Schultz assumed his interim role as Starbucks CEO in an attempt to staunch the tide of unionizations, he announced the immediate cessation of Starbucks' stock buybacks program.

Schultz called the end of the program an effort to "invest more profit into our people." However, he also accused unions of "assault[ing]" his corporation, so it's unclear if he's actually learned any lessons, or if the nod to end buybacks is simply a splashy headline-grabbing move intended to slow the rapid pace of unionization in Starbucks stores.

Still, by tying worker pay directly to stock buybacks, Schultz delivered a remarkable acknowledgement that workers have been entirely shut out of the profits that corporate America has been wallowing in for the past few decades — and Wall Street punished Schultz's honesty with a 3% dip in stock prices.

It won't be a workers' market forever, so it's crucial lawmakers protect worker gains now

As Civic Ventures president Zach Silk points out in a recent issue of "The Pitch," the sister newsletter to the "Pitchfork Economics" podcast, "If you're an American worker who's not happy at your job, odds are good that some other employer is desperate for help and offering more money than you're making right now."

Because unemployment is low and job openings are high, employers have had to raise wages in order to hire and retain staff. But unemployment can't stay low forever. If the Federal Reserve aggressively raises interest rates over the rest of the year, it's likely that the job market will cool and worker power will begin to dissipate. Workers need to gain as much ground as they can while the market is tipped in their favor, and lawmakers should do what they can now to help protect that power.

Congress already has a number of bills enhancing worker power that are waiting to be passed and signed into law, most notably the Protecting the Right to Organize Act of 2021, which establishes a right for workers to organize and collectively bargain in an environment free from potential anti-union influence from their employers.

Silk offered several more policy solutions to improve worker power in "The Pitch," including repairing the broken H-1B temporary work visa system for immigrants and unspooling some of Walmart's monopoly power. And President Biden has already unilaterally enacted several important protections for workers, including strengthening the right of federal workers to unionize and raising the wage for federal contractors to $15.

But when it comes to reining in stock buybacks, the elite shareholder class isn't going to give up those hundreds of billions of dollars a year without a fight, and workers aren't going to be appeased by the promise of a pizza party and a raise that fails to even meet cost-of-living increases. Lawmakers have an opportunity now to put an end to the practice that's pulling cash directly out of workers' pockets.