Home > income redistribution, Plutonomy > Chart of the day: US profit and wage shares 1970 – 2011

Chart of the day: US profit and wage shares 1970 – 2011

This graph shows that:

  1. since the early 1980s the underlying trend in the United States has been for a bigger share of national income going to corporate profits and less to employees, and
  2. now under Obama the rate of redistribution has reached an unprecedented level.   

  1. January 4, 2012 at 8:47 pm

    Look at the increasing magnitude of rebound in corporate share after each crisis. Interesting!

    • July 15, 2013 at 2:16 pm

      It’s interesting that it correlates with increases in regulation. The higher rebound the more regulations.

  2. Nick Gomersall
    January 4, 2012 at 10:13 pm

    Presumably if you add in the remaining income shares (from interest, proprietorships &c) the point is made all the more strongly, since these are also returns to capital. Confession: I haven’t looked back at the data to see :-(

  3. January 4, 2012 at 10:50 pm

    The corporate profits need to be deconstructed. Some of this profit is economic rent from real estate. Classical theory indicates that if there is no offsetting labor-enhancing technological progress, there is a chronic increase in rent and decrease in wages.

  4. January 5, 2012 at 7:05 am

    I know this can’t be true because when I wrote a letter to Health Affairs suggesting that in the real world it would be possible for increased health and wage costs to reduce corporate profits, and hence that was why corporations opposed them, the Harvard PhD student who wrote the original article dismissed me in one para saying that labor economic holds that total compensation is constant. How dare you use reality to contradict her

    http://content.healthaffairs.org/content/early/2004/11/16/hlthaff.w4.s.1.full.pdf

  5. Alice
    January 5, 2012 at 11:09 am

    Soon they will put a crown on the head of the CEO of Goldman Sachs and we can all stop the pathetic pretense that the US is a democracy. Each crisis only serves to empower corporate profits for the select elite few (given that more than a few scions of wall street and various hedge funds have been actually attacking viable firms and industries – ie blatant racketeering and getting away with it whilst the SEC turns a blind eye and every other regulator works from within to assist them), and in the process throwing hundreds of thousands out of work or into even poorer wages. The very core of the US’s problems is an unconstrained Wall Street who are busy destroying US capital markets.

    An interesting case here worth following

    http://www.overstock.com/50257/static.html

  6. January 6, 2012 at 8:02 am

    Thanks for that interesting chart. Is it part of a report? Can you give us the link to the source?

  7. skjandrews
    January 7, 2012 at 6:25 am

    I appreciate the graph a lot. But a skeptic has asked me a very astute question:

    “So if corporate profits are at 15%, and labor is at 61% (visually convenient, if not misleading, to overlay them); what’s the other 24%?”

    I am sure there is a very easy answer to this, but I don’t know enough about these numbers or the index to understand. Can you explain?

    • January 7, 2012 at 12:59 pm

      Land rent? There after all three factors of production.

    • January 7, 2012 at 5:42 pm

      In the government’s Gross Domestic Income by Type of Income (table 1.10), gross domestic income is $15.1 trillion, compensation of employees is $8.2 trillion, taxes are $1.1 trillion, net operating surplus is $3.9 trillion, and consumption of fixed capital (depreciation) is $2 trillion.
      The net operating surplus includes interest, proprietor’s income, rental income of persons (net of all expenses including mortgage interest and taxes, excluding corporations), and corporate profits (which includes implicit rents). Much of the “interest” income comes from mortgaged land and is really land rent. There is much rent in national income suppressed or hidden in other categories.

  8. Cristi C
    January 7, 2012 at 10:13 pm

    Well, I’m not sure it’s Obama. It could be FED and free money policy. Corporates in US are the first to take advantage of the low interest policy in action for so long. Surely, there is also an executive involved in that, namely the tax credit that corporations had in 2010-2011 which might not be in effect for too long. As we see, the corporate profit spikes are short lived and I suspect that profit credits expire and corporate taxes start to dig into the ratio.

  9. Michel Fievez
    January 10, 2012 at 8:30 am

    I am wondering to what extent this change in redistribution rate is driven by companies top management. Isn’t top management compensation more and more tied to share price and dividends ?

    • Cristi C
      January 10, 2012 at 9:52 am

      I thought “corporate profits” are simply Earnings Per Share kind of data. I expected the labor cost to include the CEO compensation plans among plain worker hourly fee.

    • Alice
      January 12, 2012 at 11:36 am

      And is the emphasis on share prices and dividends tied to the number of people forced into superannuation funds ( a captive market)??. Has the government been picking winners again without being able to see when to withdraw the support (legislative inertia and lack of flexibility is a constant problem of governments) by forcing super savings on ordinary citizens and overfeeding the financial sector. The winners as we have seen are financial firms instead of people saving for their retirements (plenty of whom since the GFC have lost)…but of course we accept and dont question that financial firms act for the interests of investors and shareholders…but do they or dont they?

      Goldman Sachs has already been shown to have been betting against its clients whilst still selling them the very investments they were shorting. Im sure this is only one of many examples and even if other financial firms have not been so brazenly hostile to their own clients, many have probably accummulated more than a fair takings in fees and commissions along the way.

  10. January 12, 2012 at 4:13 am

    I am an intelligent layman and yet can not understand this chart–specifically what is being measured along the sides of the chart? what do those numbers refer to? the two sides do not add up to 100% nor do they form a continuum. will someone please explain or at least give a link to the original website — (BEA?)

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