Let’s say you’re an average American. A “normal economic person,” as Jerome Powell once put it.
How long would it take these days, for you to buy a stake in corporate America?
Put differently, assuming you’re labor and you want to get into the capital game but you don’t have the means to start a business, how many hours would you have to work to buy admission to the club?
Well, if you proxy the earnings of “normal economic people” by the BLS’s production and nonsupervisory wages series, and you proxy corporate America by the S&P 500, the answer’s nearly 200. Have a look:
As you can see from the chart, the average non-manager in America now needs to put in 196 hours (give or take) to buy one “unit” of the market cap-weighted index comprised of shares in their employers.
Do note: Like a lot of other such charts, the metric was generally stable before the late 1980s, at which point it started to inflect higher. That’s not a coincidence. The uptrend coincided with the rise of shareholder capitalism and the final demise (i.e., the relegation to obscurity) of labor as an economic actor with clout.
Now, 40 years on from the wholesale deification of capitalism (which of course went hand in hand with the full-on embrace of profit maximization opportunities afforded to corporates by hyper-globalization), Main Street needs to put in six weeks of work to buy the S&P.
As BMO’s Ian Lyngen dryly noted, that calculation “exclud[es] the impact of taxes” on wages. The good news there is that once you do manage to save up enough to buy in, you won’t have to pay taxes on your capital appreciation as long as you don’t sell. That’s just one of the many benefits of club capital.
Get in while you can. Membership dues, denominated in your wages, are getting more expensive all the time.
A well-known professor of entrepreneurship and frequent contributor to HBR, frequently espoused a notion that to create a successful business startup one needs 10,000 hours of experience in their chosen target field. My grandfather worked as a salesman for a leading builder of industrial lighting for six years or so (during the Depression) before he knew his customers, the company’s suppliers, processes, competitors, and some valuable secret tricks, before he was ready to start up his own version of this business (he was a sixth grade dropout, btw) . That learning process made him rich enough to live to 100 and support three generations of family and a few others less fortunate than himself. My experience with over 100 startups tells me that although 200 hours of pay might allow one to buy a couple shares at Robinhood, it will take more like a couple hundred thousand bucks to enter the capital pond, especially for a startup. (I can’t tell you how much I hated capital raising for startups. So many people who could help a fellow traveler would rather rob you than help.)