At WaPo last night, Harold Meyerson makes an important argument that often gets ignored in debates over wage stagnation and economic inequality. The bad guys aren’t necessarily corporate employers who aren’t sharing profits with employees. An enormous new pressure on corporate managers that has developed in recent years is the “shareholder value” movement, which basically means corporations and their employees are denied the share of resources they used to receive.

[T]he funds corporations earmarked for their own investment, research, technology and raises during the 20th century have been redirected to shareholders in the 21st. Over the past decade, more than 90 percent of Fortune 500 corporations’ net earnings have been funneled to investors. The great shareholder shift has affected more than employees’ incomes. As Luke A. Stewart and Robert D. Atkinson noted in a 2013 report for the Information Technology and Innovation Foundation, business investment in equipment, software and buildings increased by just 0.5 percent per year between 2000 and 2011 — “less than a fifth that of the 1980s and less than one-tenth that of the 1990s.”

The power of major shareholders to appropriate corporate revenue has grown as the power of workers to win raise increases has dwindled — even though the actual commitment of shareholders to any one corporation has diminished. (In 1960, the average length of time an investor held a stock was eight years; today, it’s four months, and when computerized high-frequency trading is factored in, it’s 22 seconds.) The decimation of private-sector unions has flatly eliminated the ability of large numbers of U.S. workers to bargain collectively for better pay or working conditions. But the ability of financiers to threaten the jobs of corporate managers unless they fork over more cash to shareholders has greatly increased.

So it’s a lose-lose proposition for workers–and arguably, for the U.S. economy.

Meyerson’s reminder should be read in the context of Daniel Carpenter’s piece in the latest Washington Monthly, arguing that the agenda for reducing economic inequality will be dangerously incomplete if we do not focus on non-wage factors that affect wages, including bank regulations and other institutional issues affecting investors. They are all pulling wages in the wrong direction.

Our ideas can save democracy... But we need your help! Donate Now!

Ed Kilgore is a political columnist for New York and managing editor at the Democratic Strategist website. He was a contributing writer at the Washington Monthly from January 2012 until November 2015, and was the principal contributor to the Political Animal blog.