All It Took for Wells Fargo to Raise Wages by a Buck-Fifty Was $3.7 Billion in Tax Cuts
Yesterday I noted that the Christmas bonuses from AT&T and Comcast did not imply that workers would get a raise as a result of the passage of the GOP tax bill. And then Fortune 500 banks Wells Fargo and Fifth Third went and announced a raise, establishing $15-per-hour base pay for their employees.
Mea culpa, but you can’t blame me for being surprised—the theory is that wages are supposed to rise with corporate investment, not because bosses had a good year. That suggests that this week’s pay bumps don’t arise from economic fundamentals, but from a Christmas pudding composed of political quid pro quo and public relations strategy, with a dash of executive guilt and a pinch of largesse.
The bottom line is that the raises don’t mean much to the bottom line. Fifth Third clocked more than $2 billion in profits over the past four quarters. Bumping 3,000 employees up to a $32,000-per-year salary is an outlay that wouldn’t have cost much more than 2 percent of profits before the tax cut was factored in.
The case of Wells Fargo is similar: Goldman Sachs analysts determined that the San Francisco-based bank, most recently known for creating thousands of fake accounts for customers, would see earnings rise by 18 percent after the tax cut, the best result Goldman found among all the big banks. Earlier this month, CNNMoney reported that Wells Fargo CEO Tim Sloan told investors that the company would be doing the same thing as every other company: Giving more money back to shareholders. “Is it our goal to increase return to our shareholders and do we have an excess amount of capital? The answer to both is, yes,” Sloan said.
Last night, New York Times reporter Binyamin Appelbaum did the math. Goldman thinks the tax cut will boost Wells Fargo’s profits by $3.7 billion. Boosting the pay of its 25,000 workers who make $13.50 an hour up to $15 an hour will cost $78 million. So slightly more than 2 percent of the company’s impending windfall, or pennies on the dollar that is the corporate tax cut.