Returning to business is going to take a pay raise

America’s top executives are warning of “economic catastrophe” if workers don’t return in May, according to Axios. Several of them told the media company that “they want to have a hard national conversation about trade-offs involved in any widespread lockdowns beyond the middle of next month.”

That conversation needs to include a general increase in wages, probably not a subject the CEOs want to talk about. America’s biggest companies and their CEOs have feasted on low-wage labor for years, even as evidence mounted that workers failed to make ends meet. It’s not that companies couldn’t afford to pay workers a living wage. Indeed, America’s biggest companies have enjoyed record profitability in recent years, and the CEO-to-worker pay ratio has swelled to more than 300 to 1, an obscene spread when many workers struggle to afford housing, health care, child care and other basic necessities.

Simply put, corporate executives valued fattening their coffers more than looking after workers. So they hid behind shareholder primacy, the idea that enriching shareholders is their highest priority. They complained that unilaterally raising wages would put them at a competitive disadvantage, even as they fought efforts to raise the minimum wage. They even blamed the market: If it decrees that workers should receive inadequate wages, who are they to second-guess it?

Any competent observer could see that the status quo was unsustainable. After all, the whole point of work is to make a living. If employers were unwilling to uphold their end of the bargain, what could they expect from workers in return? Some CEOs recently came to that realisation, or said they did. The Business Roundtable, an association of top American CEOs, adopted a new “Statement on the Purpose of a Corporation” in August signed by 181 CEOs committing to “lead their companies for the benefit of all stakeholders,” including workers. Days later, Business for Inclusive Growth, a coalition of 34 multinational companies, unveiled an initiative to tackle inequality at the Group of 7 summit.

Companies were slow to act, however, and now time is short. The complaints by CEOs are a last-ditch effort to avert two conflicting situations. The first is a severe earnings recession. Public companies have begun reporting first-quarter earnings this week, and it won’t be pretty. Wall Street analysts have already slashed their 2020 earnings estimate for the S&P 500 Index to $142 a share from $175 when the year began. And that assumes business will return to normal in short order. If it takes companies longer to wrangle workers, earnings are likely to take a deeper dive.