Stock Buybacks Aren’t Holding Back Worker Wages
Critics accuse companies of spending money to repurchase shares instead of investing in growth that will boost jobs and pay. The evidence tells a different story.
Don’t blame the share buybacks.
Photographer: Joe Raedle/Getty Images
As the pandemic fizzles out, share buybacks are rising again, with big companies like Alphabet Inc. and Apple Inc. leading the way. That’s bound to lead to more calls for legislation to ban or limit corporate stock repurchases. But although they’re demonized in the popular imagination for benefiting shareholders while constraining wages and economic growth, there’s just no evidence that buybacks are bad.
In the 2010s, companies bought back their shares at unprecedented rates. An analysis by economists Kathleen Kahle and René M. Stulz found that while buybacks averaged about 19% of corporations’ operating income from 1971 through 1999, that number jumped to about 34% from 2000 to 2019. And buybacks accelerated in the 2010s, going to almost 42% of operating income. So the trend can’t be explained by the mere fact that companies were making more profits.