7 Ultra-Rich Companies Rake in Profits While Paying Workers Peanuts
Photo Credit: Olivia Leirer
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July 24 marks three years since the last time the federal minimum wage went up. Nationwide, as corporate profits have not only returned to pre-financial-crisis levels but hit record highs, millions of workers are still trying to survive on $7.25 an hour.
A new report from the National Employment Law Project [PDF] found that more than one in four private-sector jobs pays less than $10 an hour—and those jobs are mostly with large corporations, not small businesses. Of the 50 largest employers of low-wage workers, 92 percent of those were profitable last year —and three-fourths of them are doing better than they were before the recession.
Meanwhile, the executives at those companies are pocketing the money that isn't going to their workers. The NELP study found that top executive compensation at those firms averaged over $9 million last year. Assuming they work a 40-hour week, that's $4,326 an hour, about what 600 employees make at today's minimum wage.
So who are these companies stiffing their workers while making record profits? Some of them are familiar names that you probably pass (and maybe even shop at) every day. Below we take a look at eight companies raking in profits while paying their workers poverty wages.
1. Toys 'R' Us
The friendly face of Geoffrey the Giraffe, recognizable to kids all over the US, hides a low-wage empire controlled by another familiar name: Bain Capital. That's right, the second-largest toy supplier in the country is owned by a group of private equity firms that includes Mitt Romney's former company. And as often happens to companies bought out by private equity, 75 Toys 'R' Us stores closed shortly after Bain took over, putting some 2,250 people out of work.
But it's not just the workers laid off by Toys 'R' Us who are suffering. According to a new report from United NY and the Alliance for a Greater New York, most Toys 'R' Us workers in one of the country's most expensive (and most unequal) cities make less than $10 an hour. Michael Valdez, a member of New York Communities for Change, worked at Toys 'R' Us at the Bronx Gateway Mall while in college, making $8.50 an hour. “It wasn't enough to cover books and college expenses. I couldn't fathom how a family would live on a paycheck,” he told AlterNet. “And then the hours that we were given -- they had a whole lot of employees so the hours weren't much. Sometimes they would schedule you in and then call you and say we don't need you today.” (The Gateway Mall got about $10 million in taxpayer subsidies from the city of New York.)
Toys 'R' Us has had its problems complying with labor laws as well, including child labor law. It paid a $200,000 fine to the Department of Labor in 1999 after an investigation found more than 300 underage workers working longer hours than allowed by law. Pretty incredible for a company whose vision statement says “Our Vision is to put joy in kids’ hearts and a smile on parents’ faces.”
Meanwhile, Gerald Storch, the CEO of Toys 'R' Us, took in $7.9 million in total compensation in 2011 (a $5.2 million increase from the previous year), and lives in an 11,000-square-foot home on two acres of New Jersey land. He bought the house for $3.4 million in 2006, the year he took over as CEO. The company as a whole had revenue of nearly $14 billion last year, according to United NY and ALIGN.
“The majority of people in our job carry three cards -- that’s our Walmart associate card, our discount card, and a welfare card. New York does not need a retailer that will take sustainable, quality jobs away from these neighborhoods by creating low-wage jobs,” Girshriela Green, a member of OUR Walmart (Organization United for Respect at Walmart), told United NY and ALIGN. It's a common refrain that you hear repeated from Walmart employees around the country— AlterNet heard the same story recently from workers in Los Angeles. Walmart is by far the country's largest low-wage employer, with a US workforce of 1,400,000 people, according to NELP. And last year its highest-paid exec took home $18.1 million, or $9,066 an hour.
But even that's not the most shocking Walmart statistic making the rounds these days. Nope, instead we've just learned that the Walton family—just six family members of Walmart founder Sam Walton— have as much wealth between them as the bottom 48.8 million American families combined. That's over 41 percent of the country. Or at least, that's what they had in 2010. Considering that between 2007 and 2010, they went from having $73.3 billion to $89.5 billion, who knows what they've got now?
3. Con Edison
New York's energy company is in the headlines right now for its lockout of 8,500 skilled workers, the folks who keep the city's power grid running and keep the air conditioning flowing during record heat. “And they say we have to cut costs, to keep the stock profitable... They don't answer to us, they don't answer to the customers out on the street,” a Con Edison mechanic told AlterNet's Michelle Chen.
But that's not Con Ed's only labor problem. The company's cleaning crew and security contractors make as little as $8 an hour, according to United NY and ALIGN's report. Meanwhile, Con-Ed's president and CEO, Kevin Burke, made nearly $11 million last year, the equivalent of $5,272 per hour. The report notes:
In other words, a cleaner making $8.00 per hour would need to work 659 hours or 16.5 weeks to earn what Burke makes per hour. Burke received an increase in 2011 of $688,653, which alone equals the annual wages of 41 cleaners earning $8 hourly.
Instead of an increase like Burke received, contracted cleaners at Con Ed’s headquarters recently had their salaries cut from as little as $9 to $8.50 per hour. Instead of ensuring that their contracted workers are making enough money to support their families, Con Ed has been rewarding its CEO enough to enable him to maintain at least three homes – a Westhampton Beach, NY home worth nearly $1 million, an Upper East Side apartment worth $1.5 million, and a house that he bought for $2.3 million in 2011 in Ponte Vedra Beach, Florida.
Con Edison made over $1 billion in profits last year—and spent $2 million lobbying over the last two years, in part against a law that would've required it to pay those contracted low-wage workers a decent living.
4. Lage Management Corp Car Washes
For a city that runs on public transit, New York still has a lot of car washes—and they're some of the worst offenders when it comes to abusing low-wage workers. New York's Department of Labor investigated the industry in 2008 and found that over 78 percent of the city's car washes were violating minimum wage and overtime laws, 39 percent had managers pocketing workers' tips, and a quarter didn't provide meal breaks for workers. When ALIGN and United NY surveyed 5,000 car wash workers this year, they found that only 23 percent of them were offered protective gear to keep them safe from the harsh chemicals they use to leave customers' vehicles sparkling.
In 2009, one particular car wash kingpin, John Lage, who owns some 21 car washes, was forced to pay $3.4 million in back wages, damages and interest to over 1,000 workers who were paid less than the minimum wage and denied overtime.
Yet Lage continues to live like a king, with two waterfront homes, one in Queens and one in Westchester. The lakefront house in Westchester cost $1.9 million back in 2002, and according to the report also has a swimming pool and turrets—and is across the street from his son and business partner's $1.3 million home.
5. Air Serv
When we talk about airports and flying, the workers who come to mind tend to be TSA security guards or the pilots and flight attendants we interact with on the plane. But there's a whole other group of workers that we may see and deal with regularly—or may not see, but whose services we all enjoy. Doing jobs like baggage handling and checking IDs or cleaning the cabin of the plane before passengers board, these workers are often subcontracted out—and many of them make around $8 an hour.
Air Serv, one of these companies, had over $400 million in revenue in 2010. Its CEO, Frank Argenbright, is worth some $300 million, and lives in a $6.8 million home in Sea Island, Georgia—while many of his workers at Newark and JFK airports make less than $8 an hour.
Before founding Air Serv, Argenbright was the CEO of Argenbright Security, which did passenger screenings before the TSA took over—including at two of the three airports from which the 9/11 hijackers departed. He was personally denounced for that (major) screwup, including by disgraced former House majority whip Tom DeLay, who said in 2001, “Argenbright has become a synonym for failure.”
Despite that reputation, he was still able to hustle up $7 million from friends to found Air Serv. He told Forbes that he is “more careful and generous when it comes to dealing with his workforce these days.” If $8 an hour is generous, we'd hate to see stingy.
McDonald's is a brand virtually synonymous with America, cited as an example of US cultural hegemony around the world. Yet it is known almost as much for its low-wage jobs as it is for its French fries, having spawned the term “McJob,” implying a low-wage, low-skill position.
Remember last year, when the company announced its "National Hiring Day” to fill 50,000 of those $8 an hour jobs? Hundreds of workers showed up to grab those McJobs. Nationwide, McDonald's is the third-largest low-wage employer after Walmart and Yum! Brands, which owns Taco Bell, Pizza Hut and KFC, employing nearly 860,000 workers. While the rest of the economy (and low-wage workers) are suffering, McD's has been profitable over the last three years, and famously expanding. It's got more revenue, profits and cash holdings than before the recession began. According to Business Insider, its CEO/chairman of the board, James A. Skinner, made $7 million in 2011 (he also owns stock in the company worth some $16 million), and its COO/president, Donald Thompson, made $3.3 million.
Business Insider's Henry Blodget asked earlier this year how Walmart, McDonald's and Starbucks felt paying their employees so little. Henoted that they could pay employees an additional $5,000 a year out of their operating profits and still make “boatloads of money” but have workers living above the poverty line.
Starbucks is marketing a new coffee blend these days—the “Indivisible” blend, which sells for $14.95 a pound. But there's a new hook behind the even-more-overpriced coffee (their normal blends sell for $9.95 or so): if you buy it, they'll donate $5 (the $5 more they're charging for it) to “Create Jobs for USA.”
The money's actually going to the Opportunity Finance Network, essentially a microlending consortium that funds small businesses. As Keith Spencer at Dissent noted, the irony is stunning—Starbucks, known for putting small businesses out of business when it rolls into a neighborhood, wants to help small businesses get loans?
And of course, if Starbucks wants to help with the US economy, perhaps it could start by paying its workers more. Its average pay for a barista is about $8.74 an hour, which comes out to about $18,111 a year. In 2006, Starbucks settled with the National Labor Relations Board after attempting to bust a union forming in its New York stores.
Erik Forman, a Starbucks employee and union activist fired and then reinstated after an NLRB complaint, told Josh Eidelson at In These Times, "You’re running around like a chicken with its head cut off, trying to make all these drinks, because the stores are understaffed. So you go home at the end of the day exhausted, and you still can’t pay your bills.”
Starbucks' chief executive, Howard Schultz, meanwhile, made $65 million in 2011 in salary, stock options and bonuses. His “retention bonus” alone was $12 million. According to the company's own records, it had a record year in 2011, with revenues of $11.7 billion.
It doesn't seem like Starbucks needs to convince customers to donate money to create jobs. Instead, it could use some of those record profits to make the jobs it's already created into good jobs. Maybe then its employees could afford some of that expensive coffee.