Powerful new data shows just how badly American workers are faring in the 21st Century, as corporate profits soar ever higher.
Labor and capital share in the nation’s economic output, but an awful trend line for working people appears in data released Wednesday night by the Federal Reserve Bank in St. Louis.
Dean Baker, the liberal economist who studies income at the Center for Economic and Policy Research, told me this “redistribution from workers to capital, on this scale, has never happened before in the post-World War II era.”
The chart showing a falling share for labor is the “flip side of record profits,” Baker added. “With unemployment still at extraordinarily high levels, workers have little bargaining power. This means that employers are able to take almost all of the gains from the economy’s productivity growth.”
Here is the Fed chart showing the rise of corporate profits for the same period beginning in 1950, with only that one steep but brief drop during the Great Recession:
These two charts show that 1980, when Ronald Reagan won election, and 2001, when George W. Bush became president, marked major downward shifts in labor’s share and large increases in corporate after-tax profits. America has six million corporations, but just 2,600 of them own more than 80 percent of all business assets.
Major news organizations have done virtually no reporting on how corporate lobbyists are quietly persuading Congress and state legislators, as well as regulators in Washington and the 50 states, to rewrite the rules of business. These new rules decimate private sector unions, insulate big companies from the rigors of competitive markets, take away consumer rights, force workers and customers to pay taxes that corporations legally get to keep and in myriad other ways take from the many to benefit the few. These changes are detailed in my book The Fine Print: How Big Companies Use Plain English to Rob You Blind.
Since Reaganism replaced the New Deal in 1981, labor’s share has drifted downward except during President Clinton’s second term, which also produced the only federal budget surpluses since 1969.
Careful observers may notice that labor’s share rises during recessions. That is because by definition profits fall during recessions, while wages tend to be what the economists call “sticky,” meaning they are less volatile. But the long-term trend since Reagan is clear – more and more for capital, while the slowly dwindling share for labor has plummeted since 2000.
Since 1980 corporate pre-tax profits have grown at almost twice the rate of pre-tax wages. After-tax profits of corporations have grown at 2.4 times the rate of wages, my analysis of Table 1.14 at the federal Bureau of Economic Analysis shows.
Wages are only part of total income and the differences are less stark when the costs of fringe benefits, primarily health care, are taken into account. But benefits are not cash in people’s pockets and many companies have cut spending on retirement and other benefits to finance rising health insurance premiums.
The best evidence of flat-to-falling wages is found in the median wage data, which the Social Security Administration calculates annually from every W-2 form issued to every worker in America.
The median wage – half make more, half less — has been stuck at a bit more than $500 per week for more than a decade.
Measured in 2011 dollars, the median wage was $27,142 in 1999. It then slipped in 2011 to $26,965, a decline of more than $3 per week in real terms.
Now take into account cuts in fringe benefits like pensions, 401(k) matches, health insurance and bigger healthcare co-pays, not to mention working overtime off the books, and the real cuts to worker financial well-being are severe.
Wage growth since 1999 has been almost entirely among those earning $100,000 and up.
Consider 2011. That year 102,694 people were paid $1 million or more for their labor. At the top were the 93 people who averaged $79.8 million, Social Security Administration data show.
Not counted in this high-end labor data are earnings deferred into the future. Most workers could save only $16,500 that year, but a little-known law allows executives, movie stars, professional athletes and top sales agents to save unlimited sums. Some have saved billions of dollars, as I first explained in 1996.
We have known for 16 years that executive pay has been growing faster than even corporate profits, indicating that investors are not doing as well as the managers they hire to run companies.Click here for reuse options!
Copyright 2013 The National Memo