AT&T's announcement that it would boost US capex by $1 billion and pay a $1,000 special bonus to 200,000 employees once Trump signs the Tax Cut bill into law (ideally before the holidays), has unleashed a veritable torrent of trickle down economics. And who would have thought that the "Fight for $15" movement would see some of America's biggest banks as its latest members.
Shortly after the AT&T announcement, and just an hour after the passage of the Republican Tax Cuts and Jobs Act which cuts corporate taxes, in an attempt to be among the first to win the administration's benevolence, Fifth Third Bancorp said that just like AT&T, it would pay more than 13,500 employees a bonus and raise the minimum wage of its workforce to $15 an hour. In total, approximately 75% of employees will receive a pay increase or bonus. Senior managers and top executives are excluded from the special payments.
Cincinnati-based Fifth Third, the fifteenth largest U.S. bank by asset size, said the tax cut allowed it to re-evaluate its employee pay and pass along some of the windfall. Nearly 3,000 workers will see hourly wages rise to $15. The $1,000 one-time bonus is expected to be paid by the end of this year, the bank said, assuming President Donald Trump signs the bill into law by Christmas.
"We want to invest in our most important asset – our people,” said Fifth Third President and CEO Greg Carmichael. "Our employees drive our reputation, our business and our success.”
Carmichael said the higher wage is an important step to help support individuals, their families and the communities in which we operate. Fifth Third has a history of investing in its 18,000 employees. Once the legislation is signed into law, nearly 3,000 hourly employees will see their pay increase to $15 an hour. The one-time $1,000 bonus is expected to be distributed by the end of the year, assuming the president signs the bill before Christmas. Senior managers and executive leadership are excluded from this compensation.
"It is good for our communities, employees and Fifth Third Bank,” Carmichael said.
At almost the exact same time, scandal-plagued Wells Fargo also said it would be boosting its minimum wage for employees to $15 an hour, to 11% from the current minimum wage of $13.50, which was prompted by the GOP tax plan. Warren Buffet's favorite bank also said it would target $400 million in donations to community and nonprofit organizations next year, and also announced that beginning in 2019, it will target 2% of its after-tax profits for corporate philanthropy.
“We believe tax reform is good for our U.S. economy and are pleased to take these immediate steps to invest in our team members, communities, small businesses, and homeowners,” said President and CEO Tim Sloan. “We look forward to identifying additional opportunities for Wells Fargo to invest, as we continue to execute our business strategies and provide long-term value to all our stakeholders. As the nation’s largest small business lender and residential mortgage provider, we understand our significant role in helping grow the economy.”
“We’re ensuring that Wells Fargo is a great place to work by offering market-competitive compensation, career development opportunities, and a broad array of benefits,” Sloan said. “In addition to today’s announcement, over the past year we have added four additional paid holidays per year; enhanced our parental, caregiving, and backup adult care paid leave programs; and announced plans to grant restricted stock awards to approximately 250,000 team members that will vest in two years subject to grant terms. These awards are generally equivalent to 50 shares of Wells Fargo stock for eligible full-time team members and 30 shares for eligible part-time team members.”
In light of the bad press the bank has received in recent years, Wells' attempt to mollify the general population, and the administartion, was to be expected. Furthermore, the bank's generosity is hardly a shock following Goldman's Monday calculation that Wells Fargo stands to benefit the most from all US banks, with up to 18% in EPS upside as a result of its lowered income tax.
And while it is certain that Wells' benefits from tax cuts will more than outweigh any compsenation increases or philanthropy, it is also assured that many more banks will follow in these two banks footsteps as US corporations scramble to demonstrate their generous conscience, and "civic duty", by returning if only a fraction of tax cut benefits to their employees and community. And who knows, maybe this time trickle down will actually work.