Wall Street is countering Senate liberals Charles Schumer and Bernie Sanders after the two proposed legislation that would prevent companies from buying back their own shares until they raise their minimum wages to $15 per hour.
"True, wage growth remains soft by historic standards and secular trends that do not favor low-skill workers remain in force. However, we are not convinced that restricting buybacks is a sensible solution," AB Bernstein's chief U.S. equity strategist, Noah Weisberger, wrote in a note to clients. "Good companies buy back their shares."
Household names including Apple, Walmart and Johnson & Johnson are the many that have announced multibillion-dollar share repurchase agreement over the last several years. Eighteen percent of corporate America reduced their outstanding share counts by at least 4 percent in the third quarter, which boosted their earnings per share, according to S&P Dow Jones Indices.
Such buybacks swelled to a record $1.04 trillion in 2018 between a historic bull market and a one-time tax boost from President Donald Trump's landmark legislation.
It's that surge in share repurchases that exacerbates inequality among Americans, Schumer and Sanders argued in their New York Times op-ed. Their reasoning follows that the owners of capital have seen their portfolios swell in value in recent years as corporate suites opt for short-term, self-serving buybacks while middle management and the working class toil through meager-to-flat wage increases.