Pay the workers

Bloomberg Open Interest lower-third reading "Micron warns increased worker pay could lower profits."

Micron is doing very well selling memory, because everyone pouring money into AI is buying it. In its earnings report last night, September 30th, it posted $54.2 billion in revenue for the quarter and $133.2 billion for the year, at an 87% gross margin. And the warning was that worker pay may cut into profits. On the call, the CFO put roughly $1 billion of higher cost into next quarter from compensation and startup expenses, after raising incentive pay for every employee. Their margin guidance for next quarter is about 86%.

That’s wild. Those workers are getting paid to build the thing that puts other people out of jobs. AI has been cited in 116,175 announced U.S. job cuts so far this year, more than any other reason. They should be paid a lot.

Here’s why it matters past Micron. Consumer spending is about two-thirds of the U.S. economy. People who lose their income can’t spend, and when they stop spending, the economy shrinks. And it’s the people with less who spend the most of each dollar they get. A Boston Fed working paper found the share of new income people spend falls as their wealth goes up, and concluded that growing wealth inequality likely reduces overall consumption and limits growth. Meanwhile, by Moody’s count, the top 10% of households already account for more than 45% of spending, and the bottom 60% for 23%.

So it could be a big boon to the economy if Micron spreads the income it’s making to its workers, and they go out and spend it. That’s the problem we have with the economy: it all just goes to the top.