The Economics of Killing the Golden Goose

You Though Eggs Were Expensive

If corporate greed had a theme song, it’d be “I Will Survive”—Until Next Quarter Profits Drop.” But what happens when businesses slash jobs, hoard cash, and expect the economy to keep humming like an unpaid intern?

The Goose & Golden Eggs

Ever hear of Aesop’s fable, The Goose with the Golden Eggs? The story is as relevant today as ever—especially when you look at what’s happening in the U.S. economy and other developed countries.

If you don’t quite remember the fable, here’s a refresher:

A poor man wakes up one morning to find a golden egg in his favorite goose’s nest. Delighted, he cashes in and finds another golden egg the following day. This continues daily, turning him from poor to fabulously wealthy. But instead of appreciating the steady income, greed takes over. He convinces himself that there must be more gold inside the goose—so he kills it to get everything all at once.

Spoiler alert: no gold inside. He’s left with nothing, and his spending habits soon drain whatever fortune he has.

The Modern-Day Goose

This fable keeps popping into my head when I think about money and economic sustainability—primarily how corporations, CEOs, shareholders, and activist investors treat their golden goose.

Today, the golden eggs are revenues and profits from businesses. The goose? Employees who keep those businesses running and consumers who buy their products.

And just like the man in the fable, corporate greed threatens the very thing that produces wealth.

We’re witnessing an era of aggressive cost-cutting, mass layoffs, and skyrocketing executive compensation, all in pursuit of ever-increasing quarterly profits. Companies are gutting their workforce while squeezing more productivity out of fewer employees, all while raising consumer prices.

Consider these recent trends:

• Mass Layoffs – Tech giants, retail chains, and financial institutions have slashed hundreds of thousands of jobs, despite record profits. (Looking at you, Google, Amazon, and Goldman Sachs.)
• Federal Layoffs… Thanks to Elon and DOGE? – In a bizarre twist, the federal government was forced to cut thousands of jobs due to budget shortfalls exacerbated by plummeting tax revenues from capital gains—partly thanks to Elon Musk’s meme-driven market manipulations and the wild ride of DOGE (Dogecoin). It drains public funding when billionaires shift their wealth into speculative crypto and avoid taxable income. Meanwhile, vital government workers get pink slips while Elon tweets laughing emojis.
• Musk’s Government Contracts Balloon Under Trump – Since President Trump’s return to office, Musk’s companies have seen a significant uptick in government contracts. SpaceX alone has secured an additional $22 billion in federal deals, raising eyebrows about potential conflicts of interest, mainly as Musk’s Department of Government Efficiency (DOGE) oversees layoffs in agencies that regulate his businesses.
• Soaring Executive Pay – In 2023, the median CEO pay at S&P 500 companies hit $14.8 million, while worker wages have stagnated. The CEO-to-worker pay ratio now averages 344:1—a far cry from the 20:1 ratio in 1965.
• Stock Buybacks Over Wages – Companies spend billions on stock buybacks to inflate share prices rather than reinvest in their workforce. In 2023 alone, the top 500 U.S. companies spent over $900 billion on buybacks—yet still claimed they couldn’t afford raises.
• Rising Costs for Consumers – While corporations rake in record profits, real wages for most workers haven’t kept pace with inflation. Housing, healthcare, and education costs continue to outstrip earnings, making it harder for people to afford the basics.

Killing the Goose

Like Aesop’s greedy farmers, corporations and investors are extracting maximum value now at the expense of long-term economic health. Cutting wages, shrinking benefits, and hiking consumer prices reduce the spending power of those who sustain these businesses.

It’s a short-term win but a long-term disaster.

A strong middle-class fuels economic growth—not just for workers but also for businesses. When people have stable jobs, fair wages, and disposable income, they spend it. That spending drives demand, which in turn fuels business growth.

So why are so many corporations gutting their workforce, overcharging their customers, and hoarding wealth at the top? It’s like killing the goose while expecting golden eggs to keep coming.

We don’t fault business owners, managers, or investors for wanting a return on their efforts. We’re traditional capitalists and believe a well-regulated free market spreads prosperity.

But unchecked corporate greed? That’s not capitalism—that’s corporate feudalism.

Dividends & Stock Buybacks

Dividends and stock buybacks can be practical tools for companies to reward their shareholders and employees, much like a sole proprietor drawing personal compensation from their business profits. However, when these financial maneuvers come at the expense of reinvesting in the company’s growth—such as in research and development (R&D) or employee wages—they risk “slaying the golden goose” that generates sustainable wealth.

The Current Landscape

U.S. companies have significantly increased their stock buybacks and dividends spending in recent years. In 2023, S&P 500 companies allocated approximately $795 billion to share repurchases, slightly decreasing from the $922.7 billion spent in 2022. Dividends reached a record $588.2 billion in 2023, up 4.2% from the previous year.

The Opportunity Cost

Imagine if a portion of these funds were redirected toward innovation and workforce development. For instance, allocating half of the 2023 buyback expenditure—approximately $397.5 billion—to R&D and job creation could have transformative effects.

Investing in Innovation

Redirecting funds into R&D could lead to groundbreaking products and services, driving long-term profitability. Companies like Apple have demonstrated how continuous investment in innovation leads to market-defining products such as the iPhone and iPad.

Job Creation Potential

Investing in the workforce enhances productivity and stimulates economic growth. Assuming an average total compensation cost of $75,000 per employee (including benefits), reallocating $397.5 billion could theoretically create approximately 5.3 million jobs. This influx of well-paying jobs would increase consumer spending, further boosting the economy.

The Multiplier Effect

An additional 5.3 million individuals earning competitive salaries would likely increase demand for goods and services, fostering economic expansion. Businesses would benefit from a larger customer base with greater purchasing power, potentially leading to higher profits and, subsequently, more resources to reinvest.

A Balanced Approach

While returning profits to shareholders is a legitimate business practice, a balanced strategy that also prioritizes reinvestment in innovation and human capital is crucial. This approach ensures the long-term health of the company and the broader economy, preventing the proverbial “golden goose” from being sacrificed for short-term gains.

In conclusion, companies can create a virtuous growth cycle by thoughtfully allocating resources between shareholder returns and essential investments in their future and that of their employees.

Jobs vs Shareholders

It’s a common belief that when shareholders receive dividends or benefit from stock buybacks, they inject that money back into the economy. While there’s some truth to this, the reality is a bit more nuanced—and, dare I say, a tad more self-contained.

The Reinvestment Loop

Many shareholders, especially the affluent ones, don’t rush out to spend their dividend checks on yachts or luxury vacations. Instead, they often reinvest these earnings back into the stock market. This practice is so prevalent that, according to Welch & Forbes, dividends can account for a significant portion of long-term stock market returns, thanks to the power of compounding through reinvestment.

The money circulates within the financial markets rather than flowing into the broader economy. It’s like a high-stakes game of Monopoly where the players keep passing “Go” and collecting $200 but rarely spend it on anything that benefits those not seated at the table.

Spending vs. Hoarding

Wealthy individuals often have more money than they can reasonably spend. As a result, they invest a substantial portion of their income, making their money work for them. In contrast, someone earning $60,000 annually spends most of their income on necessities like housing, food, and transportation. This spending directly stimulates economic activity, supporting businesses and creating jobs.

The Economic Impact of Profit Allocation

When a company’s profits are predominantly funneled to shareholders through dividends and buybacks, the broader economy doesn’t benefit as much. The funds remain within the stock market ecosystem, contributing to asset inflation but not necessarily to real economic growth.

Conversely, the impact can be substantial if companies allocate some of their profits to research and development (R&D) and employee wages. Investing in R&D can lead to innovative products and services, opening new markets and driving demand. Improving employee compensation increases purchasing power, leading to higher consumer spending. Both approaches stimulate economic growth more effectively than stock buybacks or increased dividends.

Are Businesses Slaying the Golden Goose?

The metaphor of “killing the golden goose” applies when companies prioritize short-term shareholder returns over long-term investments. By focusing excessively on immediate profits, businesses may neglect the factors that ensure sustained success: innovation, employee satisfaction, and customer loyalty.

Historical Perspective

Reflecting on the Great Recession of 2008, many companies resorted to mass layoffs to preserve their bottom lines. This approach exacerbated the economic downturn and led to long-term consequences for the workforce. As noted in a study published in the Monthly Labor Review, mass layoffs during the Great Recession had severe economic effects, including volatile financial markets and declines in investment.

Economists have criticized such short-sighted strategies. For instance, Nobel laureate Joseph Stiglitz, in his book Freefall: America, Free Markets, and the Sinking of the World Economy, argues that prioritizing immediate financial gains over sustainable economic practices contributed to the financial crisis.

The Path Forward

Balancing shareholder interests with investments in innovation and human capital is crucial. Companies that adopt a long-term perspective, focusing on sustainable growth rather than short-term profits, are more likely to thrive and contribute positively to the economy.

In conclusion, while rewarding shareholders isn’t inherently detrimental, overemphasizing dividends and buybacks at the expense of reinvestment can stifle economic growth. By nurturing the “golden goose” through strategic investments in R&D and employee development, businesses can ensure their prosperity and that of the broader economy.

The Results of Layoffs

In today’s corporate landscape, many business leaders opt to boost stock prices through cost-cutting measures, notably layoffs. This strategy often aims for a quick uptick in quarterly stock performance, as Wall Street frequently rewards such announcements with rising share prices. The immediate beneficiaries? Executives and investors.

The Immediate Aftermath

When layoffs are announced, stock prices often experience a surge. For instance, Spotify’s stock jumped by 7.5% after its layoff announcement in December 2024, contributing to a 30% increase in its share price that year. Similarly, Meta’s downsizing efforts led to a stock price increase of over 170% during the same period.

The Human and Economic Cost

While shareholders and executives may celebrate, the employees who receive pink slips face uncertainty and financial strain. Beyond the personal toll, these layoffs can have broader economic implications. The disposable income of laid-off workers diminishes, leading to reduced consumer spending, which can negatively impact local businesses and the economy.

Short-Term Gains vs. Long-Term Consequences

Implementing layoffs during periods of profitability raises several concerns:

• Erosion of Goodwill: Companies like Southwest Airlines, known for their employee-centric cultures, have faced backlash after announcing layoffs despite their longstanding commitment to job security. Such actions can tarnish a company’s reputation and erode employee trust.
• Decline in Morale and Productivity: Surviving employees often experience decreased morale, reducing productivity and engagement. The fear of unexpected layoffs can foster a culture of insecurity, hindering innovation and collaboration.
• Loss of Institutional Knowledge: Letting go of experienced employees can result in a significant loss of expertise, which is not easily replaceable and can affect the company’s long-term performance.

A Question of Strategy

While layoffs can be a necessary response to economic downturns or structural changes, their use as a tool for short-term stock enhancement during profitable times is debatable. This approach may prioritize immediate financial metrics over sustainable growth and employee well-being.

The Irony of Prosperity-Induced Layoffs

It’s paradoxical when companies announce record profits alongside workforce reductions. Employees, the very individuals contributing to the company’s success, may feel undervalued and expendable. This sentiment can lead to negative word-of-mouth and damage the company’s brand image.

While the stock market may applaud cost-cutting measures like layoffs, a company’s long-term health relies on its people. Balancing short-term financial gains with investments in employee satisfaction and development is crucial. After all, a company’s actual value is not just in its stock price but in the dedication and talent of its workforce.

The Goose Is Dead

Imagine an economy as a finely tuned engine, where each component plays a crucial role in its smooth operation. Now, picture this engine powered by just two individuals: you, the business owner, and me, your dedicated employee. Our company produces a single product, and we are its loyal consumers. This simple system hums along efficiently until you lay me off to boost profits. Initially, the company’s bottom line gleams with the savings from my salary. However, a glaring issue emerges in the next quarter: I can no longer afford our product without my income. The once self-sustaining loop falters, and the company’s revenues take a hit.

The Broader Implications

While this scenario is a simplification, it mirrors real-world dynamics. When companies prioritize short-term gains through layoffs, especially during profitable periods, they risk undermining the demand that sustains them. The immediate boost in stock prices may appease investors, but the long-term consequences can be detrimental.

Recent Trends and Concerns

Recently, several companies have adopted cost-cutting measures, including layoffs, to enhance short-term financial metrics. For instance:

• Tech Industry Layoffs: In 2024, the tech sector witnessed significant layoffs, with approximately 100,000 jobs cut globally, 70% of which were in the United States.
• Federal Workforce Reductions: The Department of Government Efficiency (DOGE) announced plans to reduce the federal workforce by up to 75%, potentially leading to significant unemployment in regions heavily reliant on government jobs.

The Ripple Effect

Layoffs, especially en masse, don’t just impact the displaced employees; they send ripples throughout the economy:

• Reduced Consumer Spending: Laid-off workers tighten their belts, leading to decreased spending on goods and services. This contraction can stifle business revenues across sectors.
• Erosion of Goodwill: Companies that lay off employees during profitable times risk damaging their reputation. Former employees and the public may view such actions as corporate greed, leading to diminished brand loyalty.
• Loss of Institutional Knowledge: Experienced employees carry valuable knowledge and skills. Their departure can lead to a loss of productivity and innovation, affecting the company’s long-term prospects.

A Call for Balanced Strategy

While it’s understandable for businesses to manage costs, especially during economic downturns, resorting to layoffs during periods of profitability can be counterproductive. Sustainable success hinges on a balanced approach considering short-term financial health and long-term growth. Investing in employees, fostering innovation, and maintaining consumer trust are pillars of a resilient economic engine.

In Conclusion

The metaphor of “killing the golden goose” aptly describes the pitfalls of prioritizing immediate profits over sustainable practices. Businesses must recognize that their workforce and consumers are integral to their success. Companies can ensure longevity and contribute positively to the broader economy by valuing and investing in these stakeholders. After all, an engine runs best when all its parts are well-maintained and working in harmony.

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