Corporate Financialization and Worker Prosperity: A Broken Link

The ability of workers to bargain for a greater share of a firm’s corporate profits has eroded over decades, and one of the growing drivers of this reality is the financialization of the corporate sector. Corporate financialization can be summed up as two behaviors: firms (like Walmart or Pfizer) increasingly earning profits from financial activity instead of producing goods and increasingly shifting profits to shareholders rather than investing in workers and innovation. In other words, we are seeing non-financial corporate firms increasingly behave like financial actors. Such corporate behavior leads to the economic puzzle we see today: record high corporate profits and share prices, but low corporate investment in research and development and workers and stagnant wages.