Month: February 2021

Poverty Wages and Large Corporations

There was a time when landing a job with a large corporation was, even for blue collar workers, a ticket to a comfortable life—good wages, generous benefits and a secure retirement. Women and workers of color did not share fully in this bounty, but they generally did better at big firms than small ones.

All this began to unravel in the 1980s, when big business used the excuse of global competition to chip away at the living standards of the domestic workforce. This took the form of an assault on unions, which had played a key role in bringing about the improvements in the terms of employment. In meatpacking, for instance, what had been a high-wage, high-union-density industry turned into a bastion of precarious labor.

When large corporations off-loaded a substantial portion of their employment costs, they created a higher burden for the public sector. As their pay and benefits shrank, workers turned to the social safety net to fill the gap. Programs such as Medicaid and Supplemental Nutrition Assistance Program (food stamps) that were originally designed for employees of small firms and for the unemployed became a lifeline for the workforce at some Fortune 500 companies.

From a social point of view, this was a good thing—but it also created a situation in which taxpayers were in effect subsidizing the labor costs of mega-corporations. This became an issue in the early 2000s with regard to Walmart, and there were unsuccessful efforts in states such as Maryland to require large firms to spend more on employee healthcare.

Although the issue receded from public attention, figures such as Sen. Bernie Sanders have sought to keep it alive, putting the main focus on the employment practices of Amazon.com. In 2018 Sanders helped pressure the giant e-commerce firm to raise its wage rates by introducing legislation that would have taxed large companies to recoup the cost of government benefits given to their employees.

Now the chair of the Senate Budget Committee, Sen. Sanders is continuing his effort from a position of even greater influence. He just held a hearing on whether taxpayers are subsidizing poverty wages at large corporations. As in 2018, just highlighting the issue had a concrete impact. At the hearing the chief executive of Costco announced that his company would raise its minimum pay rate to $16 an hour. This came a week after Walmart hiked its rate to $15 but only for a portion of its workforce.

After years of wage stagnation, it is heartening to see that large companies are beginning to feel some pressure to boost their wage rates. Yet rises of only a few dollars an hour will not do the trick. Pay needs to be substantially higher than $15 an hour. That’s why the real solution to the problem is not voluntary corporate action but rather collective bargaining. Amazon and Walmart could assist their workers much more by dropping their opposition to unionization.

Having a voice at work would solve not only the pay problem but also the crisis in healthcare coverage and other benefits.  The scope of that crisis was made plain by another speaker at the Senate Budget Committee hearing. Cindy Brown Barnes of the Government Accountability Office summarized research showing that an estimated 12 million adults enrolled in Medicaid and 9 million adults living in households receiving food stamp benefits earned wages at some point in 2018.

The GAO had more difficulty determining the portion of these populations employed at large corporations. That is because only a limited number of the state agencies administering Medicaid and food stamps collect and update employer information on recipients.

The partial data is still revealing. Among the six states providing employer information for Medicaid recipients, Walmart was in the top ten in all, while McDonald’s and Amazon were in five. Among the nine states providing employer information for food stamp recipients, Walmart was in the top ten in all, while McDonald’s was in eight and Amazon was in four.

These findings provide valuable information for the Sanders campaign against poverty wages. Companies such as Amazon—which recently reported that its annual revenues in 2020 were up 38 percent and its profits nearly doubled to $21 billion—can well afford to pay employees a living wage and provide the benefits necessary for a decent standard of living.

Public safety net programs are essential to society, but those who are employed by mega-corporations should not have to make use of them.

A Reckoning for Texas

Electric utilities come in in numerous forms. Some are cooperatives or municipals devoted to serving the interests of their members. Others are investor-owned entities that are unabashedly focused on the pursuit of profit. Texas has some of both, but the Lonestar State stands out for its decision to operate a statewide power grid cut off from all other states. This move is now causing massive hardship amid the polar vortex.

Hare-brained energy market approaches have been around for some time in Texas. Houston was the headquarters of Enron, which made use of federal deregulation to promote aggressive energy trading schemes that turned out to thoroughly fraudulent. It was only a few months after Enron declared bankruptcy that the Texas legislature adopted a statewide electricity market deregulation scheme.

Since then, the old-line utilities have been broken up, bought and sold like so many Monopoly properties. For instance, Dallas Power & Light morphed into TXU Electric Delivery, which in turn became Oncor Electric Delivery. Oncor was then taken over by California-based Sempra Energy.

Houston Lighting and Power was split up into several companies, including CenterPoint Energy. When the storm hit, CenterPoint was focused on a complicated financial deal involving its subsidiary Enable Midstream Partners.

Amid this wheeling and dealing, Texas utilities seemed to have forgotten about their most important responsibility: serving their customers. They created the now ridiculously named Electric Reliability Council of Texas to coordinate their efforts, but neither that non-profit nor the individual companies thought to prepare for the kind of extreme weather situation that is now crippling the state.

There have been signs that Texas climate was becoming erratic. In 2018 hailstones the size of tennis balls caused $1 billion in damages in North Texas. Houston had its earliest snow ever. Bloomberg is reporting that ERCOT was warned a decade ago that Texas utility facilities needed to be winterized to assure service during colder weather.

ERCOT deserves no sympathy, but it is absurd for politicians like Gov. Greg Abbott to put all the blame on the non-profit when he has long been a climate change denier, a deregulation proponent and a renewable energy basher.

The current disaster should serve as a wake-up call to Texas politicians as well as Texas utilities that they should focus less on ideological posturing and financial maneuvers and pay more attention to the needs of the residents of the state.  

The Opposite of Sustainability

Oil giant Royal Dutch Shell is one of the many global corporations, especially those based in Europe, that profess to be devoted to sustainability in their operations. Shell claims that its commitment in this area dates back to 1997.

For most large corporations, these assertions of environmental virtue are dubious at best. In the case of Shell, they are especially far-fetched, given the company’s history in countries such as Nigeria.

In the early 1990s Shell began to face protests over its oil operations in Nigeria. In 1994 the Movement for the Survival of the Ogoni People, then led by Ken Saro-Wiwa, began blockading contractors working on Shell’s facilities to bring attention to the large number of pipeline ruptures, gas flaring and other forms of contamination that were occurring in the Ogoniland region. The group described Shell’s operations as “environmental terrorism.”

The Nigerian government, a partner with Shell in the operations, responded to the protests with a wave of repression, including the arrest of Saro-Wiwa, who was hanged in 1995. Shell denied it was involved, but critics pointed to the role played by the company in supporting the military dictatorship. Protests against the company continued.

A lawsuit brought on behalf of the Saro-Wiwa family was later filed in U.S. federal court under the Alien Tort Claims Act. In 2009, just before a trial was set to begin, the company announced that as a “humanitarian gesture” it would pay $15.5 million to the plaintiffs to settle the case. By contrast, a 2011 United Nations estimated that an environmental cleanup of the Niger Delta would cost $1 billion and take 30 years.

A separate Alien Torts Claims case brought on behalf of the Ogoni people against Royal Dutch Shell in 2002 made its way through the U.S. legal system to the Supreme Court, which in 2013 ruled that the U.S. courts could not be used to bring claims against overseas acts by foreign companies.

Another case–this one brought by Friends of the Earth Netherlands and four Nigerian farmers–was filed in a Dutch court, alleging that spills from Shell pipelines damaged the livelihood of the farmers. The case, which represented the first time a Dutch multinational has been sued in the Netherlands for overseas activities, was mostly dismissed in 2013 but the plaintiffs persisted.

Recently the Hague Court of Appeal finally issued a decision on the case, ruling that Shell has to pay compensation to the farmers and install equipment to prevent future pipeline leaks. The amount of the compensation has yet to be determined.

It is unlikely that Shell, which generates more than $300 billion in annual revenue and ranked number 5 in the most recent Fortune Global 500 list, will have difficulty paying whatever the Dutch court mandates. Perhaps the bigger problem is that Shell has never acknowledged responsibility for the ecological damage and still insists that the leaks were caused by sabotage.

Until it fully owns up to its culpability for human rights and environmental damage in Nigeria, Shell has no business presenting itself as practitioner of sustainability.

Toxic Corporations

Given the Biden Administration’s focus on the climate crisis, the announcement by General Motors that it will transition to an all-electric fleet, and the growing emphasis on sustainability among institutional investors, one might be tempted to think the United States is embarking on an environmental rebirth.

Despite some good signs, it is worth remembering that many large corporations—including ones that tout green credentials—are still spewing vast amounts of dangerous emissions into the air, land and water. Perhaps the best reminders of this reality are the data compilations produced by the Political Economy Research Institute at the University of Massachusetts-Amherst.

PERI recently released the latest version of its Toxic 100 lists, which cover air, water and greenhouse gas emissions. The lists are based on data from the EPA’s Toxics Release Inventory and its Greenhouse Gas Reporting Program. The EPA publishes the data only for individual U.S. facilities, whereas PERI combines the emission amounts by parent company and thus reveals which large corporations account for the largest pollution shares. PERI’s approach is much like the one we use in Violation Tracker. It helps a lot that database wizard Rich Puchalsky of Grassroots Connection works on both projects.

There are a total of about 220 parent companies that appear on one or more of the three PERI lists. The Netherlands-based chemical company LyondellBasel Industries, which owns heavily polluting plants in Texas and other states, is at the top of the air list. Military contractor Northrop Grumman tops the water list, mainly because of the massive emissions at its subsidiary Alliant Techsystem’s facility in Virginia. The parent with the most greenhouse gas emissions is, ironically, Vistra Energy, which is heavily involved in renewable power generation and storage.

I was interested to see which corporations appeared on all three lists. I found that 16 firms have that dubious distinction. Not surprisingly, they include the country’s largest petroleum, chemical and steel producers.

Five of the group appear in the top 50 on each of the three lists: Dow Inc., Koch Industries, Berkshire Hathaway, ExxonMobil and Marathon Petroleum. Dow is the only one of these to be in the top ten of two different lists. It ranks fourth in water emissions and fifth in air emissions (as well as 44th in greenhouse gases). Koch Industries is in the top 25 of all three lists.

Dow’s position as the worst overall polluter comes as no surprise, given that the company has a toxic history that dates back decades and includes its notorious role in the production of napalm and Agent Orange during the Vietnam War. Its reputation only worsened after its 2001 acquisition of Union Carbide, which refused to pay adequate compensation for the thousands of victims of the 1984 disaster at its pesticide plant in Bhopal, India. Dow was also embroiled in a major scandal involving faulty silicone breast implants.

The blots on Dow’s record are not all in the distant past. In 2019, for instance, it reached a $98 million settlement with the U.S. Justice Department, the State of Michigan and the Saginaw Chippewa Indian Tribe to restore areas damages by hazardous releases from Dow’s operations in Midland, Michigan.

You wouldn’t learn any of this background by reading the history section of the company’s website, which includes a page headlined “Sustainability from the Start: Dow’s Rich History of Environmental Stewardship.” As for the present, the site declares: “At Dow, we’re working to deliver a sustainable future for the world by connecting and collaborating to find new options for materials that make life better for everyone.”

This sort of greenwashing language is all too typical in the materials large corporations publish about themselves. PERI’s Toxic 100 shows that these companies have a long way to go before they can accurately depict themselves as paragons of environmental virtue.