It’s almost Christmas so I’ll put this nicely … I’m not a big fan of President Trump.
However, he scored a big win today with the tax bill. With the final passage of the “Tax Cuts and Jobs Act,” companies are rushing out announcements of increased benefits to their employees. Among them are:
- AT&T – announced a $1,000 bonus to over 200,000 employees
- Comcast – announced a $1,000 bonus to over 100,000 employees
- Fifth Third Bank – announced a new $15 minimum wage and $1,000 bonus to 75% of their employees
- Wells Fargo – announced a new $15 minimum wage
I believe these companies are acting totally rationally. It fact, I believe these announcements are pure genius (especially for AT&T that is in the middle of fighting with the Trump administration over the Time Warner deal).
I believe the timing of these announcements is politically motivated (and incredibly smart). However, I don’t believe the new tax bill has anything to do with the substance of these announcements other than the timing.
What’s really going on?
There’s a battle to retain and attract labor – especially low-cost labor. The current unemployment rate is 4.1%. Labor markets are tightening up (I hear this from multiple companies in which I’m invested).
Who wins in this environment? Large, profitable corporations.
They get to give their employees a raise that they likely had to do anyway. They cover the cost with a fraction of their coming tax savings. They win political points by saying the new tax bill prompted their action. Win-Win-Win.
Who loses in this environment? Struggling companies that employ entry level workers, but have little or no profitability.
They don’t get a benefit from the tax bill, but their costs (or their turnover) go up anyway.
The environment just got a little more difficult for retailers. Same with franchised restaurants.
Oh, and to answer the President’s question, no, I’m not tired of winning yet. But that’s a football statement. SKOL VIKINGS!
