Shareholders have proved to be more successful at securing bumper payouts than workers have at winning higher pay, according to two studies that show dividends outstripping wages by a considerable margin in recent years.
Oxfam said analysis of global data showed that dividend payments to shareholders over the last three years grew an average of 14 times faster than worker pay across 31 major economies.
The charity said the division of profits in economies that account for 81{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} of global income, or gross domestic product (GDP), is heavily skewed to shareholders, creating “a yawning gap” between the rich and those on middle to low incomes.
Published to coincide with International Workers’ Day, the analysis shows that in the UK, after taking inflation into account, dividends increased by 13{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} between 2020 and 2023, while average wages remained stagnant.
A separate study of UK data over the last 30 years by the left-of-centre Common Wealth thinktank found that between 2000 and 2019, dividend payments grew 5.5 times faster than workers’ pay on average each year.
If pay had kept pace with dividend payments, workers would each be £2,844 better off a year, it concluded.
If employee compensation and dividend payments had grown at an equal pace between 1988 and 2019, the report found, hourly labour compensation on the eve of the pandemic would have been almost 9{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} higher than it actually was.
To calculate the pay/dividend gap, the thinktank used a weighted average that compensated for the relatively small amount of dividend payments compared with much larger salaries and pensions that make up the bulk of worker compensation.
Between 1988 and 2019, Common Wealth found that labour compensation increased by an average of 1.6{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} a year, while the figure for dividends grew by 4.2{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}. If both had risen at the same pace of 1.9{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}, which represents a weighted split, labour compensation would have been 8.9{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} higher an hour by 2019.
Common Wealth is among many organisations to highlight the power exerted by shareholders over corporate profits over the last 30 years. The situation has persisted through the pandemic and cost of living crisis as many global companies that operate in the UK, including Procter & Gamble and Nestlé, found they could maintain profits margins and dividend payments.
High levels of corporate profits, fuelled by government subsidies, have also been blamed for a large proportion of the rise in prices during 2022 and 2023.
Oxfam said the Janus Henderson global dividend index, which monitors annual corporate dividends, was on course this year to beat an all-time high of $1.66tn reached last year.
The index covers the world’s largest 1,200 corporations, representing 90{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} of global dividends paid.
Dividend payouts climbed by 45{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} ($195bn) in 31 countries between 2020 and 2023, while wages grew by just 3{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}, the report said.
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If Chinese companies are excluded, global wages growth, after inflation is taken into account, fell by 3{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} during this period.
“Using data from Wealth-X, Oxfam estimates that the richest 1{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} pocketed an average of $9,000 in dividends in 2023. This is equivalent to eight months’ wages for the average worker,” the report said.
Amitabh Behar, Oxfam International interim executive director, said: “Corporate profits and payouts to rich shareholders have gone into the stratosphere, while wages continue to go nowhere.
“Millions of people hold jobs that trap them in a cycle of working hard while still unable to afford enough food, medicine or other basics, amassing greater fortunes for the super-rich who profit from their work.”
A spokesperson for Common Wealth said the findings “underscored the need to rebalance power at work to deliver a dynamic, democratic, and decarbonised economy”.
They said the next government should commit to allow for sectoral collective bargaining and strong workers’ rights to boost labour’s share of corporate profits.
