Wednesday, January 31, 2018

Lawrence Summers on Those Employee Bonuses – a Redux of the 1990’s?

Lawrence Summers made an interesting comments during a CNBC interview:
Former Treasury Secretary and Obama administration economic advisor Larry Summers said Friday that recent employee bonuses are stunts and not reflective of long-term hopes for prosperity that tax cuts are supposed to bring. "I think it's a gimmick," Summers told CNBC's "Squawk Alley." "I think in many cases the firms have to raise wages because labor markets are tight, and so why not curry some favor with the White House by linking it to the tax cuts."
During the late 1990’s we saw a temporary surge in demand for R&D personal that was driven by the internet revolution. A lot of the compensation for these employees came in the form of employee stock options. One possible rational for this form of compensation is had these companies raised their employee wages then it might be difficult to curtail compensation if the demand for their products and services fell. In fact we know the internet revolution did have a crash at the turn of the century and the issuance and value of these employee stock options took a hit.

1 comment:

ProGrowthLiberal said...

I have not posted over at Angrybear for about a decade but some of our Econospeak posts are being reposted - for which I am very grateful. It seems my posts get some great comments over there. Under my Black Unemployment Rate post was this very wise suggestion:

"Picture worth a thousand words, so supplement with a picture next time.
Show the graphs with various unemployment and participation rate measures together.
That would allow readers to see the performance and gauge for themselves rather than wading through verbiage.
Add the data for supplementary analysis."

I used to do this on a monthly basis after each BLS release but have not being doing this in quite a while. I should have done so with that post except I have a bit of a difficulty with my current clunky laptop in terms of making the graphs and getting them up on blogger.

Yea I know - no excuses. I need to head down to Best Buy and buy a new lap top.