The amount of profits piled up by corporations dwarfs all reason, but the amount of money executives and speculators haul in at our expenses comes into stronger focus when we examine a different metric: Revenue per employee.
The 10 corporations that have the highest revenue per employee averaged US$5.8 million per employee. Each of these top 10, incidentally, is either a pharmaceutical or an oil and gas company. Topping the list is Phillips 66, which managed to haul in $11.5 million per employee. One suspects that the average employee sees no more than a minuscule fraction of that figure.
Examining the 100 largest corporations in the world by revenue, Expert Market, a business consultancy, ranked them by revenue per employee to see which were the most “efficient.” (It is quite possible that other, smaller corporations extract more revenue per employee.) The other oil and gas companies among the top 10 were PTT, Valero Energy, Exxon Mobil, Royal Dutch Shell, BP and Statoil.
Grangemouth oil refinery at sunset (photo by Steve Garvie, Dunfermline, Fife, Scotland)
Interestingly, two of these companies are government enterprises: PTT is majority-owned by the government of Thailand and Statoil is two-thirds owned by the government of Norway. So much for the idea that governments should never own enterprises; at least the profits from these companies can be used for public good. The public ought to own all energy companies considering the gigantic subsidies they receive — an estimated US$5.6 trillion per year, when environmental and health costs are added to the subsidies, foregone taxes and other expensive goodies handed out by governments.
The pharmaceutical companies among the top 10 are Amerisourcebergen Corp., Express Scrips Holding Co. and McKesson Corp. Amerisourcebergen and McKesson both distribute pharmaceuticals, and Express Scrips administers prescription drug benefits for tens of millions of health plan members. Each of these primarily operates in the United States, the only advanced-capitalist country without universal health coverage, and two also operate in Canada, where corporate pressure on the public health system is strong, in part due to its proximity to the U.S.
The pharmaceutical industry is immensely profitable in the U.S., and the industry’s layer of distribution and administration adds to the overall cost. Health care in the U.S. is designed to deliver corporate profits rather than health care, and these kinds of huge profits explain why health care costs in the U.S. are vastly higher than any other country while delivering mediocre results.
Technology companies squeeze somewhat less out of their employees. Apple ranks as the technology company with the most revenue per employee, at about $1.9 million. Google ranks second at $1.2 million. But how much profit does a company need to make? Apple’s products are produced through sweatshop labor outside the U.S., mostly in China, through an army of subcontractors that dwarf the size of Apple’s direct employees.
U.S. President Barack Obama once asked Apple’s chief executive officer, Steve Jobs, what it would take to bring those jobs back to the U.S., and Jobs replied, “They aren’t coming back.” Apple claims it can’t afford to pay higher wages. Yet Apple is sitting on an immense pile of money — $206 billion according to its own quarterly financial report.
Research by the Centre for Research on Socio-Cultural Change in Manchester, in 2012, found that the cost of manufacturing a 4G iPhone in China is $178 while the phone sells for $640 — a profit margin of 72 percent. The Centre calculated that if it were made in the U.S. by employees making $21 an hour, the production cost would be $337, a still robust profit margin of 46 percent.
At the end of the day, corporate executives and financiers expect those revenues to be converted into profits, and the higher the revenue that can squeezed out of each employees, the higher the profit is likely to be. From 1995 to 2005, profits per employee at the 30 largest companies by market capitalization (that is, the highest valuations set by stock markets) more than doubled, according to the business consultant McKinney & Company.
A more recent list, prepared by Bloomberg, shows 25 corporations with profits per employee higher than $400,000. Oil and gas companies are well represented here, with 10 making the list, including Exxon Mobil. Four biotechnology companies made the list, as did Apple with $573,000 net income per employee.
So if more is squeezed out of us, then there is less we are able to buy. Thus the “recovery” often blathered about in the corporate media is a recovery for the one percent. Of the eight recessions since 1960, consumer spending has increased less from the bottom of the recession than in any of the previous ones after the same period of time. If you don’t have it, you aren’t buying it, especially since so many people are trying to reduce their debt.
The flip side of this is that the massive profits corporations are raking in by not paying their employees, and squeezing more out of those who do have a job, is that record amounts are spent on buying back their stock, paying out higher dividends, on mergers-and-acquisitions or on bloated executive salaries. The corporations comprising the Standard & Poor’s 500 Index are on course to spend nearly $1 trillion on stock buybacks and dividends in 2015, or nearly equal to their total operating earnings for the year.
Cut back, cut back is the mantra. But have you noticed its always working peoples’ turn to cut back?
Systemic Disorder 
“Technology companies squeeze somewhat less out of their employees. Apple ranks as the technology company with the most revenue per employee, at about $1.9 million. Google ranks second at $1.2 million. But how much profit does a company need to make? Apple’s products are produced through sweatshop labor outside the U.S., mostly in China, through an army of subcontractors that dwarf the size of Apple’s direct employees.” It would be interesting to know the rate of exploitation when the indirect employees, e.g., contractors, consultants, etc., along with workers in “feeder companies”, and also the ratio of what the pay, including benefits, per hour of labor time, adds up to comparing different countries.
The results are irreversible, as long as countries are “free-floating” competitors. Apple, say, if it brought all its production, hardware and software, “home” to the U.S., would probably be priced out of competition with its own capital in the abject colonial and neocolonial world (e.g., Philippines, Indonesia) and for the want of a better description, the emerging world (e.g., the BRICS, especially China, Mexico possibly).
Joel,
A couple of years ago a book came out called Factory Man. It was about the Basset Furniture family and the furniture industry. The book along with the history of Bassett Furniture and the furniture industry in the US was how one of the last Bassets, John, was trying to stay in the US. In the book once China opened for business, it was pretty much “Katy bar the door” and if you did not move your furniture manufacturing to China you were going to be uncompetitive and left behind. However the loss of furniture manufacturing in the US decimated many people and families especially in Virginia and nearby states. John Basset has tried to stay in the US and has had many legal troubles in trying to compete with his competitors who left for China.
The book reads like a text for “Race to the Bottom 101”. Companies doing all sorts of “glossing over” of crappy furniture to make it look good so then can make it as cheap as possible. I agree with you. As long as governments and people allow this behavior then it will be irreversible. Where the corporate class and the elites used to try to be decent citizens of their respective countries, now they are just as Bill Moyers says the Mercenary Class, predatory and exploitative. I think protectionism has its downsides but there has to be some middle ground.
Calculating the rate of exploitation of indirect employees would be very interesting, agreed. A paper toward that goal was put out by two researchers, Yuqing Xing and Neal Detert, states that Chinese sweatshop workers account for only 3.6 percent of the total manufacturing cost of an iPhone. The paper can be found at this link, and I discussed this in my post, “More capitalism for Chinese ‘Communist’ Party.”
On a simple profit-and-loss basis, Apple wouldn’t actually be “priced out of competition” if it were to bring manufacturing back to the U.S.; it would merely have its profit rate reduced to a still high level. But your point is nonetheless true in the sense that Wall Street would never stand for it because speculators demand profits rise. If profits don’t, stock prices don’t, and speculators become very angry when stock prices don’t go up. Thus Wall Street continually applies the whip, and top executives are rewarded for rising stock prices under what it is called, in financial lingo, “aligning executive interests with shareholder interests.”
Lowering wages is the surest route to boosting profits, and so production is continually moved to new places with yet lower wages. The merciless competition of capitalism dictates this result, and no reform within capitalism can touch that dynamic.
The latest economic warfare involves unlivable policy changes by the IMF and World Bank. Whereas until now, countries that refused, neglected or otherwise failed to meet their payback obligations on loans restricted in obtaining new credits. Now, starting with the Ukraine,ia country could refuse to pay its debts to another country on the U.S./high-finance enemy list, starting with Russia and you can bet soon to include China, and be rewarded with expanded IMF/World Bank loans. This destroys the ability of targeted countries and financial entities to offer credit as an alternative to IMF/World Bank U.S.-NATO dictates, because Russia, China, and whoever else would not be able to enforce collecting debts.
The Ukraine will now immediately be able to escape paying $3 billion to Russia. Turkey, which was building oil and natural gas conduits between Russia and Europe based on already-advanced Russian credit, is being offered the same exception to the old rule that you must honor your obligations in order to continue borrowing.
The positive side of the move of capital to China and other former colonial and neocolonial countries was that it was a way that these countries, which had been underdeveloped by imperialist powers could now catch up to some degree, and begin to threaten and shake the economic dominance of what were once the great manufacturing economies, monopoling the production of real wealth. The Trans-Pacific “Partnership”, which you have called so much attention to, excludes both Russia and China, which have shorelines on the Pacific. The political reasons for the discriminatory exclusion is obvious. Economically, the U.S. is using the contradictions among the economically emerging countries to preserve or restore U.S. domination, hopefully in vain.
Ominously, growing military threats and actual confrontation are paralleling the economic warfare, from the U.S. regime-change war in Syria, to the U.S.-NATO sponsored Nazi-tinged coup d’etat in the Ukraine, to the mischief in Macedonia, to the “Pivot to the Pacific”.
Reblogged this on An Outsider's Sojourn II and commented:
Consider the following numbers for a moment, Mr and Ms Merica, while you’re slaving away at work to pay “Santa”!
Canada isn’t the only country whose health care system is being damaged by the US. New Zealand’s National Party has a long history of making secret deals with US insurance companies to increase the role of private insurance and decrease the role of public sector spending in our health care system.
And New Zealand’s health care system will be seriously damaged if the Trans-Pacific Partnership goes through. The U.S. health care model is what pharmaceutical companies, one of the most vocal set of proponents for the TPP, want to impose on other countries.
Reblogged this on As the Adjunctiverse Turns and commented:
Top corporate profiteers ~ big oil, big pharma and tech. No surprises there…
The current corporate/US/Imperial mind set is liquidationism pure and simple. The constellations of interlocking productivity that make local economies are being systematically dismantled through the concentration of all production in low labor cost regions.
The productivity and sustainability of local communities world wide affected by these trends are destroyed even as AGW makes survival a growing challenge in the most affected places.
The glorification of extractionism in the Anglo/American world is destroying both civilization and ecology, and the latter is the bigger problem because without it there is no recovery.