Tuesday, November 02, 2021

FAANGs Contribute Disproportionately to S&P 500, Yet Little to US Employment

Tech giants Facebook, Amazon, Apple, Netflix and Google constitute a disproportionate share of US stock market performance.

Often referred to as the FAANGs, they make up about 19 percent of the S&P 500, as of August 2021. It means that one-fifth of the performance of a 500-company stock exchange is driven by just five of them. This disproportionate representation is staggering considering that the S&P 500 is generally viewed as a proxy for the United States economy as a whole. It's unsettling that just five stocks can have such a substantial, inordinate effect on the performance of an entire exchange.

The five FAANG stocks are among the largest companies in the world, with a combined market capitalization of nearly $7.1 trillion as of August 2021.

However, despite their enormous size, these companies contribute very little to US employment.

Total Number of Employees

Facebook - 58,604

Apple - 147,000

Amazon - 950,000 in US (1.3 million globally)

Netflix - 12,135

Google/Alphabet - 135,301

In total, these five powerhouses employ just 1.3 million Americans. The civilian labor force amounts to 161.35 million people. In other words, the FAANGs employ just 0.008 percent of the US civilian labor force.

Yet, they have a combined market capitalization of over $7 trillion and make up one-fifth of the S&P 500.

Meanwhile, the FAANGs, plus Microsoft, had a combined “tax gap” of more than $100 billion in the decade ending in 2019, according to an analysis by Fair Tax Mark, a British organization that certifies businesses for good tax conduct.

Many argue that the FAANG’s are vital to the US economy. At the least, they are quite vital to the S&P 500. However, when it comes to employment and paying taxes, the FAANGs contribute relatively little.

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