Shareholders gained 50 times as much as workers in pandemic, study finds
U.S. mortgage applications slid for a sixth straight week as mortgage rates climbed to a 12-year high, weighing on both home purchases and refinancing.
Shareholders in some of the biggest U.S. companies reaped wealth gains in the pandemic that outpaced pay hikes for their employees by more than 50 to 1, according to a study by the Brookings Institution.
The report — focused on 22 industry leaders, including Amazon.com and McDonald’s — found that stockholders added some $1.5 trillion in wealth from January 2020 to October 2021. The companies spent about $27 billion on additional pay and bonuses, and five times that amount on dividends and stock buybacks, the Washington-based think tank said.
Brookings said it was seeking to measure the corporations by the standard they set for themselves — specifically, an August 2019 declaration organized by the Business Roundtable and signed by 181 chief executives. That document promised a shift away from shareholder primacy toward a “more inclusive” corporate model that would put more weight on other stakeholders, including workers.
“Nearly all of the companies fell short,” analysts Molly Kinder, Katie Bach and Laura Stateler wrote in the report published Thursday.
Across the 22 companies in the Brookings study, the average increase in inflation-adjusted wages over the period ranged between 2% and 5%. Because of the “very low starting point, the vast majority of workers still earn too little to get by” — with only seven of the 22 paying at least half of their workers enough to cover basic expenses, Brookings said.
Meanwhile, 16 businesses in the group carried out share buybacks worth some $50 billion, enough to have raised the annual pay of a median worker by about 40%, Brookings found.
The Brookings researchers said they monitored wage announcements and company disclosures and corresponded with each company to confirm the data. Only two companies — Walt Disney Co. and Dollar General Corp. — didn’t respond, they said.
Rising rates crimp mortgage applications
U.S. mortgage applications slid for a sixth straight week as mortgage rates climbed to a 12-year high, weighing on both home purchases and refinancing.
The Mortgage Bankers Association’s index of total applications dropped 5% in the week that ended April 15 to 374, the lowest since February 2019, the Washington-based group said Wednesday.
The average contract rate on a 30-year fixed mortgage rose 7 basis points to 5.2%, the highest since April 2010. The rate has climbed 1.14 percentage points in the past eight weeks. That’s the quickest rise since 2003. The effective rate, which includes the effects of compounding, rose to 5.39%.
“The recent surge in mortgage rates has shut most borrowers out of rate/term refinances, causing the refinance index to fall for the sixth consecutive week,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“In a housing market facing affordability challenges and low inventory, higher rates are causing a pullback or delay in home purchase demand as well,” Kan said.
The MBA’s refinancing index decreased 7.7% to the lowest level since March 2019. Purchase applications fell 3% last week and are down more than 8% so far this year.