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Apple and Income Inequality in the U.S.

EconMatters's picture





 

By EconMatters

 

Apple stock price rallied to $602.50 on March 21 partly due to the the company's decision to spread some of its huge pile of cash ($97.6 billion in cash equivalent with no outstanding debt at the end of 2011) in the form of dividend and a share buyback program. 

 

Apple said it will pay a quarterly dividend of $2.65 per share, starting July 1, and plans to buy back up to $10 billion in stock over three years starting Sept. 30.  Apple is not the only one hoarding cash.  According to Moody's, U.S. corporations, including Apple, has amassed a record $1.24 trillion of cash last year post 2008 credit crisis.

 

Apple has been under pressure to reward shareholders as Apple's iProducts sales keeps feeding its cash mountain.  So we most likely will see other large corporations follow suit declaring dividends and initiating share buyback programs in the coming quarters.

 

However, the more disconcerting question is this:

Given that Apple is the leader in technology innovation and creativity, are these two options (dividend and share buybacks) the best Apple can come up with to put its cash to good use? 

After all, Apple shareholders have been rewarded very handsomely as Apple stock soared from a $5+ stock in 1996 to today's $600+ level.  Apple stock went up 75% in the past 52 weeks alone.  Do Apple stockholders really need more cash reward from Apple?

 

Would Apple not better off re-investing its cash in innovative technology and product R&D, and niche acquisitions? Better yet, how about giving some cash back directly to the employees at Foxconn--Apple's iSweatshop--or Apple's own mid to low levels employees  (i.e. non-executive and non-managerial ranks) to boost morale and  productivity?  After all, Apple owe a large part of its' enviable iSales and iMargins to the hardworking worker bees at Foxconn and Apple.  (Yes, we know U.S. corporations are paying wages at the "fair market rate" in oversea shops, but a little cash sprinkle now could go a long way.)      

 

The chart below from Council on Foreign Relations (CFR) illustrates how labor’s share of income in the United States has plummeted while personal dividend income as a percentage of disposable income has soared since 2009.

 

Labor and Dividend Income

 

In fact, CFR noted that dividend income along with corporate profits took the biggest jump in the early 1980s, a time in which labor’s share of income has fallen almost continuously.  Needless to say, fiscal, legal, and monetary policies enacted by the U.S. government and the Federal Reserve had a big hand in this divergence, as well as growing income inequality in the U.S.  

 

How big is the income inequality in the U.S. relative to the rest of the world? Here are some statistics from the Standard Center of Poverty and Inequality:

"The U.S. ranks third among all the advanced economies in the amount of income inequality. The top 1% of Americans control nearly a quarter of all the country's income, the highest share controlled by the top 1% since 1928."

Perhaps it is time for corporations to rethink more meaningful and productive long-term strategic use of their cash, instead of driving income gap ever wider to appease the 1%.

 

Further Reading - The Rise and Rise of Apple: Time for a Split?

 

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Thu, 03/22/2012 - 11:19 | Link to Comment LarryDavis
LarryDavis's picture

You spend 600 a share and I give you 2.50 every 3 months???? 2.50/600 let me fucking see. That's not even 1 percent. What asshole is going to invest in a company that barely pays 1% per annum when the rate of inflation is closer to 10%. How fucking stupid are these people? If anyone is willing to give me 600 dollars i will gladly give them 2 back every few months no question. 600 bucks can build probably 10 ipads that sell for 600 each and cost about 30 (slave labor + parts). So, for every 600 they make about 3000-3500 and you get 2.50 every quarter. My idiotic banter is intended to imply the ENTIRE FINANCIAL SYSTEM IS FUCKING CRAZY. INVEST IN YOUR OWN SHIT AND ENCOURAGE PEOPLE TO BUILD THEIR OWN TABLET PCS. IF ANYONE KNOWS HOW TO BUILD TABLET PCS AND THEY ARE WELL_CRAFTED CONTACT ME AND I WILL BUY ONE. FUCK THESE CORORATE ASSHOLES AND MAY STEVE JOBS CARCASS BE DEGRADED. THIS ARTICLE NEEDED TO REACH A MORE DRAMATIC AND THOUGHTFUL CONCLUSION. REINVEST THE FUCKING PROFITS IN MID/LOW-LEVEL EMPLOYEES? GREAT ADVICE FROM ECONMATTERS TO CORPORATE AMERICA.

Thu, 03/22/2012 - 10:56 | Link to Comment Shizzmoney
Shizzmoney's picture

 Employees are viewed as expendible

Until they bear arms. 

I kind of wish the corporations and management keep fucking with the employees.  Considering there are 250 million guns in the country, shit *could* get a little spicy!

Why is it wrong to pay the people that work? If a company makes profits, it's because of either too low wages or too high prices. Why not reward the workers?

In the end, all we are is a more complicated version of Sentient organisms.  Only a few things separate us from our monkey ancestors (big differences, obv).

Ever give a dog (who isn't yours) a bone?  Ever try to wrestle that thing from him?  He puts up a fight (until of course, you either rub his tummy, or fling some food out).  But what happens if you don't have food, or that dog is rabid?  He bite you, and fights for *his* bone.

When workers ask for more pay, the ownership class accuses them of going after their wealth.  And us the fact we are much more passive that previous years (due to processed food, bread and circuses, complacency, etc), against us.  This is really, the downside of an indebted nation; a class of chained, hairless mammals who basically are the victim of the 20+ million year quest of humans to rule over one another.  We basically won't lose out shit until the rentiers start asking for too much. 

Essentially, that's what the REAL cost of egregious money printing is.  The numbers gets stretched, commodities we need for everyday life go up, and people get more selfish, especially once the pressure of debt sets in.  Basically, we are all fighting over the same bone, and the working class are just York Terriers while the "Money Changer" class are a bunch of Wolves. 

But wolves and foxes get hunted, too.  The ownership class, if they don't get their act together, will ALL learn this soon if they keep fucking with evitability.

Thu, 03/22/2012 - 10:21 | Link to Comment batterycharged
batterycharged's picture

I propose a new law that mandates 50% of all profits be given to the workers equally, regardless of where the workers reside. 50% of that 100 billion would go to Foxconn workers.

Of course that will get neg'd to death on this site. But let's look at this realistically. Why is it wrong to pay the people that work? If a company makes profits, it's because of either too low wages or too high prices. Why not reward the workers?

I mean, look at those charts, if there has ever been an indicator that coddling capital and corporations in order to create jobs and prosperity is complete bullshit, there it is. Corporate/dividend tax cuts just make corporations richer.

So back to the original premise. Henry Ford knew money in the hands of consumers was better than it sitting in vaults of the rich elite. Forcing corporations to either lower prices or increase wages with profits makes sense economically as well as socially.

Ok, now you can neg this to death with your insane belief that there is some fantasy that works called the free market.

Thu, 03/22/2012 - 10:17 | Link to Comment WTF_247
WTF_247's picture

The income shift is a direct result of the management enriching themselves at the hands of the employees.  The lower the cost of business (i.e. employees) the bigger their bonus and stock option grants are.  Dividends are a way of paying shareholders back.  When you get the majority of upper and middle management as major stakeholders in the company, the only thing they concern themselves with is driving the price higher and paying dividends which they themselves receive as either bonuses, more options, or directly if they have exercised their options or a combination of the three at the same time.

This is good if you are a shareholder, bad if you are an employee for the most part.  Employees are viewed as expendible (mostly) and reducing that cost is of utmost concern.  Offshoring is one way to do that, getting rid of higher paid employees and replacing them with new, lower priced is another.  

Of course not all companies are like this, but a lot of them are.  Rather than think of employees as an asset that is helping you to build the business, they are viewed as an expense that drags profits (and bonuses) down.

Thu, 03/22/2012 - 08:45 | Link to Comment SwingForce
SwingForce's picture

I'm glad I'm not a shareholder, because this would bother me: Give an employee a stock option to buy the stock, then spend shareholders' money to actually buy that share at full price. Sounds retarded to me.

Thu, 03/22/2012 - 10:05 | Link to Comment tempo
tempo's picture

Its so ironic watching the recent AAPL ads showing the cool US teenager voice texting with his cool girl friend about his new band's cool equipment from his parent's garage on his new cool iphone 5. AAPL used to advertise that it was going to break Corporate hold on the masses. Now it uses slave labor to make products for the elite cool kids of the rich. When will we start to see muggings of kids for the newest AAPL products like the "Jordon sneaker" craz.

Thu, 03/22/2012 - 08:41 | Link to Comment GMadScientist
GMadScientist's picture

This is not how to "Think Different".

 

Thu, 03/22/2012 - 08:35 | Link to Comment DevilsPrinciple
DevilsPrinciple's picture

The dividend is too small to be of any particular concern, one way or another. -is there a 'better' way to manage CSR, in apple's case, almost certainly. - the ithing is the microwave oven, in ten years, apple will be lucky to not view this as their peak.

 

 

Bingo. I'm pissed the dividend isn't bigger. What good is a stock if it is not paying good dividends consistently? That's right, a thief. Apple will become Microsoft, if it already hasn't started that decline.

Thu, 03/22/2012 - 08:35 | Link to Comment JamesBond
JamesBond's picture

chill out -

your missing the obvious that this article was written tongue-in-cheek

 

 

Thu, 03/22/2012 - 08:23 | Link to Comment Tic tock
Tic tock's picture

The dividend is too small to be of any particular concern, one way or another. -is there a 'better' way to manage CSR, in apple's case, almost certainly. - the ithing is the microwave oven, in ten years, apple will be lucky to not view this as their peak. Already, the iphone has serious competitors. the ipad relies on the ios and sheer volume. That's a significant success right there, ipad could continue for a while based on that. but really, what they have, is intellectual property on ios, design is merely fortunate. ...our almost compassionate masters make certain that there are no commercial os alternatives, there's your 3rd world war doctrine; while the banks are using natural language os....? As long as enforcement is a present threat, and the US has wide powers of international enforcement - just look at the GMO debacle, absolute fuckin NAzi Basterds, - apple is a safe stock.

Should they do more, eh, their business model, such as it is, relies on maintaining an exclusivity on an OS. It's like gathering up all the power in one set of hands - its typical american corporatism. Can any good from that model - who can say. ..awhile ago, the internet allowed the NorthEast to disseminate knowledge and it was a fantastic success. A real fucking wonder. Now, as far as I can tell, the inheritance is again being stolen whilst the father lies blind. The human population of earth, is suffering from a lack of adequate employment. The major contributing factor to this - is the, distortion, due to IP-protected profits, way above normal profits. On top of which, the educational system, do we actually teach the young minds to use  computers, or to play with music. No, we keep them fatted w/ slime, on violent slick tv, inebriated w/ the futility of politics and the god-like powers these foibles have hoisted unto themselves, in a parody of the word 'government'. .. the ipad is government toy, like lego for adults and children. I really wouldn't hold out much hope coming from a company like this. Now Facebook, on the other hand, that's a turn-by-turn communication tool, a whole new medium of personal communication, I mean, if you will continue to delude yourself that friends are not in fact anything but an egotistical construct.    

Thu, 03/22/2012 - 08:21 | Link to Comment blueRidgeBoy
blueRidgeBoy's picture

"Do Apple stockholders really need more cash reward from Apple?"

Fuck you - you are just another central planner masquerading as do-gooder.  Well, go "help" someone else.  As an APPL investor, I will decide what's best for me, thanks very much.  Go police someone else.  Oh, and by the way, I'll take all the dividends I can get before your socialist-in-chief hero taxes them away.  Did I mention, fuck you?

Thu, 03/22/2012 - 07:53 | Link to Comment WaEver
WaEver's picture

Spot-on Aldous !

Thu, 03/22/2012 - 07:47 | Link to Comment LawsofPhysics
LawsofPhysics's picture

When the purchasing power of all paper goes to fucking zero, then we will find out precisely who is wealthy and who isn't.  My operation may only be "worth" about 15 million on paper, but when I consider the value my employees bring to the market through our innovation and produce, I know precisely what the value of our labor is.  I don't fear a systemic collapse, and neither should anyone else who knows the value of their labor.  Only paper-pushing idiots are scared now.  That stench we are all smelling is the stink of fear from these people.

Thu, 03/22/2012 - 08:24 | Link to Comment flattrader
flattrader's picture

This is your 12 or is it 20 acre organic farm and network of other farmers?

Unless you are growing pot, your "only be worth 15 million on paper" is all in your head.

Give it a rest.

Thu, 03/22/2012 - 09:41 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Haven't been paying attention to the price of arable land have you?  We farm 23,000 acres, definitely not small, and by no means organic.  Get you facts staight, now, back to work.

Thu, 03/22/2012 - 01:48 | Link to Comment skepticCarl
skepticCarl's picture

Even for a share-the-wealth, hate the fat cats liberal like me, this article just reeks of "Nanny knows best".

Thu, 03/22/2012 - 04:07 | Link to Comment AldousHuxley
AldousHuxley's picture
Pirates of Silicon Valley - Great artists Steal

http://www.youtube.com/watch?v=TrA_lm0_ngM

 

 

Woz lets everyone know how accurate the movie "Pirates of Silicon Valley" was:

http://www.youtube.com/watch?v=1lx9JsSTklI

 

When they were working at Atari before they founded? Apple, Jobs got Woz to do his job (redesign a circuit board) for him by telling Woz he's split the pay 50/50. Woz did such a good job, Jobs was given $5000 for his work. He told Woz the pay was $600, and gave Woz $300. True story, and Woz never knew till much later. Imagine what else Jobs screwed him out of.

 

Steve Jobs was a marketer. Put a nice packaging on a Chinese suicidal slave labor made products with ideas stolen from other inventors. His father was a dick who got rid of unwanted baby Steve Jobs. Like father like son.

 

Real R&D comes from DARPA. Pay your taxes bitches.

Thu, 03/22/2012 - 07:50 | Link to Comment thurstjo63
thurstjo63's picture

Cher Aldous, I think Steve Jobs was a wee bit more than a marketer. Who thought up all those wonderful products like iMac, iPod, iPhone, iPad and was so exacting in terms of making sure that the user experience on those devices was so good? It wasn't the engineers!!!

What I find interesting is that you seem to be in the mindset that ideas can be owned like property (i.e. copyright or patents). As well you seem to imply that Wozniak was somehow shafted by Apple. Last time I looked he was a multimillionaire because of the company. A perfect example of the pervisity of this is that companies be they in film, music, telecommunications, software, etc whose distribution models are for the most part outmoded (especially in film and music) fight under the guise of protecting copyright and patents when the ones who actually innovate and create the content for the most part are shafted. Society would advanced to far greater heights without this outmoded way of viewing ideas. It's one of the numerous ways that government impedes on the free market.

What's even more bizarre is that you think real innovation is done by the government (DARPA)!?! No one hath spoken of more oxymoronic phrase putting innovation and government in the same sentence! All DARPA does mainly is confiscate and suppress. Little of the innovations that go into that bureaucracy come out and are seen and benefit the public. Methinks you truly are confused!!! :-)

Thu, 03/22/2012 - 01:04 | Link to Comment dalkrin
dalkrin's picture

Capital accumulation and investment should be rewarded.  If you are unsatisfied with the wages of labor, save up, buy a company stock, and extend yourself to be a dividend-earner.  Simple concept, followed by a wide swath of the bourgeousie, has propelled Western civilization to the point we find ourselves in today.  At least it all used to be so rosy until the Fed, fiat money, and banker cabals riddled that fine image with pox.

Thu, 03/22/2012 - 05:13 | Link to Comment AldousHuxley
AldousHuxley's picture

capitalism for others, socialism/nepotism/trustfundbabism/communism for me philosophy.

 

capitalism is not how western civilization got to the point today, for banks, banking, industrialism, fascism, imperialism, colonialism, all exists before providing wealth to certain people while exploiting the other.

capitalism is used as a merit based justification while in reality achievements are based on lucky timing.

 

America was built by exploiting labor. Labor got smart and the capitalists can't deliver without cheating with toxic securities. Now they go exploit Chinese and Indian slaves to keep the pyramid scam going.

 

the problem with capitalism is not it doesn't account for luck of timing and wealth upon birth.

Thu, 03/22/2012 - 07:01 | Link to Comment Liberty2012
Liberty2012's picture

Capitalism requires freedom.

As the ponzi of fractional reserve fiat money grows, capitalism declines, and is replaced with stealth slavery.

The two co-exist for a time, but they are not the same thing.

Thu, 03/22/2012 - 10:15 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Capitalism also requires failed institutions to do just that, fail. We don't have capitalism in the US at the moment. It is Kleptocracy.

Thu, 03/22/2012 - 07:07 | Link to Comment Ghordius
Ghordius's picture

depends on your definition - I'd say capitalism requires some degree rule of law, period.

Thu, 03/22/2012 - 07:49 | Link to Comment LawsofPhysics
LawsofPhysics's picture

There you go, ignore the liberal horseshit above and let's all admit that any system will collapse if the the rule of law is not upheld and fraud is not prosecuted.

Thu, 03/22/2012 - 07:56 | Link to Comment Ghordius
Ghordius's picture

you got my point - personal liberty is one thing, but property rights need rule of law. if corruption begets too much unprosecuted fraud the very elites starts to feel threatened by their own uberwolfes. collapse is a big word - some "revolutions" are so soft as not needing any blood to be spilled.

Thu, 03/22/2012 - 22:32 | Link to Comment Liberty2012
Liberty2012's picture

Free will is a basic truth.

Law is a tool that can be used to support personal liberty or mis-used to accommodate fraud.

We the People make the world we live in with every choice we make.

We all stand alone and we all stand together ;)

Wed, 03/21/2012 - 23:09 | Link to Comment Sutton
Sutton's picture

APPL Bosses,Call the shysters at Goldman and through an OFF Balance Sheet Derivative synthetically go short your own stock.

Things never change.

Wed, 03/21/2012 - 22:56 | Link to Comment Sophist Economicus
Sophist Economicus's picture

Wow, armchair quarterbacking on what the best use of company profits should be.    Are we going to channel FDR next?

 

If Apple and its shareholders wanted to have a bon-fire in Cupertino with those FRNs, last I checked, its NOBODYS business but theirs.

 

This is the crap that got us here in the first place.  

Thu, 03/22/2012 - 00:53 | Link to Comment stacking12321
stacking12321's picture

Wow, armchair quarterbacking on what stories zero hedge should run.

Last i checked, zero hedge is a privately owned blog, and what stories tyler decides to run are NOBODYS business but his.

 

This is the crap that got us here in the first place. 

Thu, 03/22/2012 - 08:26 | Link to Comment blueRidgeBoy
blueRidgeBoy's picture

I re-read Sophist's post and don't see where he says ZH should not have posted this, or not permitted this discussion thread.  Looks like Sophist is simply disagreeing with the post content, not questioning ZH's decision or right to post it.  Just because someone disagrees with you does not automatically imply they're trying to censor you.

Wed, 03/21/2012 - 22:45 | Link to Comment Paul Thomason
Thu, 03/22/2012 - 02:22 | Link to Comment Andy Lewis
Andy Lewis's picture

Is that like beer goggles?

Thu, 03/22/2012 - 00:28 | Link to Comment OldPhart
OldPhart's picture

OT alert to the Tylers.  With the new gadgets added, the tabs on 'my account' are now hidden behind the links.  There's no way to get to the 'Track' tab.

Thu, 03/22/2012 - 00:50 | Link to Comment stacking12321
stacking12321's picture

try widening your browser window, works for me

 

Thu, 03/22/2012 - 11:23 | Link to Comment ShankyS
ShankyS's picture

I can't believe the ACLU or some other group is not raising helll about inequality in the distribution of the dividend. Why aren't the entitled getting thier share? I mean the government buys the iShit for the entitled. The entitled then spend their government checks on apps and songs. Why are the entitled not getting their rightful share for spending their hard earned government dollars? I'm appalled at the inequality of the system. This must be addressed. This wrong must be made right. This is bullshit! This is not the way the system is supposed to work. Someone call Jessie and Al right now!

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