There's been much wailing and gnashing of teeth over the fact that corporations used part of the Trump tax cuts to pay out dividends to shareholders. This certainly sounds like a case of the rich getting richer at the expense of workers.

But is it true?

According to an article in the Washington Post by Christopher Ingraham,

A relentless focus on maximizing shareholder value has contributed to stagnant middle-class wages in the United States and fueled the rise of a society increasingly divided between haves and have-nots, according to a new working paper published by the Roosevelt Institute, a progressive economic think tank.

Source: Washington Post - February 25, 2019

The Alleged Proof

Ingraham includes the following chart to prove his claim:

Analyzing the Proof

The chart above shows that stock buybacks and dividend payouts went up by 1.3% of total corporate assets while wages declined 10.2%. That sounds really, really bad. But what caused the other 8.9% (10.2 - 1.3) of wage decline? That's a topic worthy of another essay. Bottom line, though, is that buybacks and dividends are a relatively small portion of the total. Obviously, there's more than just buybacks and dividends behind the impoverishing of American workers. [Note: Buybacks and dividends are each roughly half of the 1.3%, or 0.65%.)

Even worse, the chart is misleading or downright fraudulent because it leaves out an important factor. Namely, dividend payouts benefit employees, as do stock buybacks.

How is this possible? It's possible because the vast majority of employee retirement plans have changed over the past 30 years from defined benefit plans (traditional pensions) to "modern" 401K plans. Buybacks increase the value of shares in the 401K. And dividends are, by law, reinvested in the employee's 401K or paid out to the employee.

If you invest in mutual funds in your 401(k) account, any dividends paid by the funds you own are reinvested into more shares of the same fund. ...

The option to purchase company stock in your 401(k) plan can also classified as a qualified employee stock ownership plan, or ESOP. Under the ESOP rules you must be given the option to either reinvest the dividends paid on company stock into more shares of the stock or have dividends paid out directly to you.

Source: How 401(k) Dividends Are Paid

Conclusion

There are many, many valid reasons to criticize corporations and their behavior. Outsourcing. Short-term thinking. Offshore banking. Tax avoidance. But paying dividends is not one of them. Employees benefit from that, as do any other shareholders.

Raising valid complaints will make our case stronger and better. Creating a straw man, as the Roosevelt Institute and Ingraham did, will not.