Profit trumps everything – except of course executive pay

Here’s an interview with Doug Oberhelman, the CEO of Caterpillar.
The workers are complaining:

Caterpillar has become a symbol of the growing divergence in corporate America between profits and wages. As a percentage of gross domestic product, corporate earnings recently hit their highest level in more than 60 years, and wages fell to new lows, according to Moody’s Analytics (MCO). This inequity angers Caterpillar workers. John Arnold, a 35-year-old parts auditor at Caterpillar’s Morton (Ill.) distribution facility, says some of his co-workers are on food stamps. “I don’t understand how a company can make billions and billions of dollars in profits and have people on welfare,” says Arnold, who has worked for Caterpillar since 1999 and makes $15.66 an hour.

So how does he have the heart to squeeze more and more? The answer is he doesn’t have a heart, so it’s easy peasy.

Oberhelman paid his way through Millikin University, a small private college in Decatur, Ill., by working at a bank, where he did everything from sign home mortgages to repossess cars. “It was a fabulous experience,” he says. “You knock on the door, and you tell somebody you’re gonna take their car away—and usually they’re down on their luck, and their car is the last thing they have. So I learned to deal with that.”

Apparently empathy is something you get rid of pretty quick, if you want to be the CEO of Caterpillar. No amount of money is enough.

“I always try to communicate to our people that we can never make enough money,” Oberhelman continues. “We can never make enough profit.”

How about cutting executive pay? Oh, sorry can’t do that. We need to retain “talent”. Finally a complete misunderstanding of cause and effect and comedy ensues.

When will workers’ wages rise? Oberhelman exhales sharply. “The answer to that is: when we start to see economic growth through GDP,” he says. “Part of the reason we’re seeing no inflation is because there’s no growth. Inflation was driven by higher labor costs, not higher goods costs. Frankly, I’d love to see a little bit of that. Because I’d love to pay people more. I’d love to see rising wages for everybody.”

No Doug. Pay has not risen because of redistribution of wealth upwards. As Senator Warren pointed out, the minimum wage must be around $17.00 to have kept up with inflation. Manufacturing workers used to earn more than minimum wage 30 years back, that’s what you are paying your workers now after accounting for inflation. So, that’s a pay cut in real terms for manufacturing workers. If the pay cuts were due to low GDP growth, executive real pay would have been lowered too.