If your company is deep in debt, there’s a good chance they’re secretly using your paycheck as an interest-free loan to stay afloat.
April 13, 2026
Original Paper
Financing from Workers: Can Labor Market Power Mitigate Financial Frictions?
SSRN · 6452898
The Takeaway
Companies with significant market power don't always lay people off when times get tough; instead, they simply stop raising wages. This allows them to use the 'saved' labor costs to pay off their corporate debts, effectively forcing employees to subsidize the company's financial mistakes.
From the abstract
We show that firms with labor market power can partially offset financial distress by financing through reduced worker compensation. Using U.S. Census quarterly employer-employee data, we find that workers in highly leveraged firms experience slower earnings growth following unexpected disinflation shocks that increase the real burden of firms' nominal debt. This response is stronger for firms with greater labor market power. We find no evidence of subsequent earnings compensation or increased w