[Marxism] Wage share lowest since at least 1947. Profit share greatest since 1960s. Minimum wage at 50-year low
brian_shannon at verizon.net
Mon Aug 28 09:48:04 MDT 2006
This is a very useful and long article already posted in part by
Sayan Bhattacharyya. My deletions too are for space only. The whole
article should be read. I put the Goldman Sachs quote in caps for
obvious reasons. It is fascinating the way the politicians dance
around the issues, but the economists at Goldman Sachs tell it the
way it is. And the way, of course, the capitalists as a whole
themselves understand it and like it.
Since the head of the Federal Reserve is now considered the main
spokesman for the economy, Bernanke's cute wording bears a look. "the
livelihoods of some workers and the profits of some firms".
A firm is not a person, and the change in profits from year to year
is inherent in the system as are failures in individual firms. But
these statistics are about the working class as a whole, not the
spontaneous changes in the relationship between firms.
Cook sees two economies, one that is going great guns and the other
is that of the working stiffs. Hmm, aren't they both the same economy
and don't they describe the two poles of one thing.
Pour water on the pole base, shake it, and push it over.
REAL WAGES FAIL TO MATCH A RISE IN PRODUCTIVITY
By Steven Greenhouse and David Leonhardt
August 28, 2006, New York Times
With the economy beginning to slow, the current expansion has a
chance to become the first sustained period of economic growth since
World War II that fails to offer a prolonged increase in real wages
for most workers.
That situation is adding to fears among Republicans that the economy
will hurt vulnerable incumbents in this year’s midterm elections even
though overall growth has been healthy for much of the last five years.
The median hourly wage for American workers has declined 2 percent
since 2003, after factoring in inflation. The drop has been
especially notable, economists say, because productivity — the amount
that an average worker produces in an hour and the basic wellspring
of a nation’s living standards — has risen steadily over the same
As a result, wages and salaries now make up the lowest share of the
nation’s gross domestic product since the government began recording
the data in 1947, while corporate profits have climbed to their
highest share since the 1960’s. UBS, the investment bank, recently
described the current period as “the golden era of profitability.”
Until the last year, stagnating wages were somewhat offset by the
rising value of benefits, especially health insurance, which caused
overall compensation for most Americans to continue increasing. Since
last summer, however, the value of workers’ benefits has also failed
to keep pace with inflation, according to government data.
At the very top of the income spectrum, many workers have continued
to receive raises that outpace inflation, and the gains have been
large enough to keep average income and consumer spending rising.
In a speech on Friday, Ben S. Bernanke, the Federal Reserve chairman,
did not specifically discuss wages, but he warned that the unequal
distribution of the economy’s spoils could derail the trade
liberalization of recent decades. Because recent economic changes
“threaten the livelihoods of some workers and the profits of some
firms,” Mr. Bernanke said, policy makers must try “to ensure that the
benefits of global economic integration are sufficiently widely shared.”
. . .
But others say that war in Iraq and terrorism, not the economy, will
dominate the campaign and that Democrats have yet to offer an
economic vision that appeals to voters.
“National economic policies are more clearly in focus in presidential
campaigns,” said Richard T. Curtin, director of the University of
Michigan’s consumer surveys. “When you’re electing your local House
members, you don’t debate that on those issues as much.”
. . . Mr. Luntz predicted that the economic mood would not do
significant damage to Republicans this fall because voters blamed
corporate America, not the government, for their problems.
Economists offer various reasons for the stagnation of wages.
Although the economy continues to add jobs, global trade,
immigration, layoffs and technology — as well as the insecurity
caused by them — appear to have eroded workers’ bargaining power.
Trade unions are much weaker than they once were, while the buying
power of the minimum wage is at a 50-year low. And health care is far
more expensive than it was a decade ago, causing companies to spend
more on benefits at the expense of wages.
Together, these forces have caused a growing share of the economy to
go to companies instead of workers’ paychecks. In the first quarter
of 2006, wages and salaries represented 45 percent of gross domestic
product, down from almost 50 percent in the first quarter of 2001 and
a record 53.6 percent in the first quarter of 1970, according to the
Commerce Department. Each percentage point now equals about $132
Total employee compensation — wages plus benefits — has fared a
little better. Its share was briefly lower than its current level of
56.1 percent in the mid-1990’s and otherwise has not been so low
Over the last year, the value of employee benefits has risen only 3.4
percent, while inflation has exceeded 4 percent, according to the
In Europe and Japan, the profit share of economic output is also at
or near record levels, noted Larry Hatheway, chief economist for UBS
Investment Bank, who said that this highlighted the pressures of
globalization on wages. Many Americans, be they apparel workers or
software programmers, are facing more competition from China and India.
In another recent report on the boom in profits, economists at
Goldman Sachs wrote, “THE MOST IMPORTANT CONTRIBUTOR OF HIGHER PROFIT
MARGINS OVER THE PAST FIVE YEARS HAS BEEN A DECLINE IN LABOR'S SHARE
OF NATIONAL INCOME." Low interest rates and the moderate cost of
capital goods, like computers, have also played a role, though
economists note that an economic slowdown could hurt profits in
For most of the last century, wages and productivity — the key
measure of the economy’s efficiency — have risen together, increasing
rapidly through the 1950’s and 60’s and far more slowly in the 1970’s
But in recent years, the productivity gains have continued while the
pay increases have not kept up. Worker productivity rose 16.6 percent
from 2000 to 2005, while total compensation for the median worker
rose 7.2 percent, according to Labor Department statistics analyzed
by the Economic Policy Institute, a liberal research group. Benefits
accounted for most of the increase.
. . .
“There are two economies out there,” Mr. Cook, the political analyst,
said. “One has been just white hot, going great guns. Those are the
people who have benefited from globalization, technology, greater
productivity and higher corporate earnings.
“And then there’s the working stiffs,’’ he added, “who just don’t
feel like they’re getting ahead despite the fact that they’re working
very hard. And there are a lot more people in that group than the
. . .[I]n a sign that Republicans may be growing concerned about the
public’s mood, the new Treasury secretary, Henry M. Paulson Jr.,
adopted a somewhat different tone from Mr. Bush in his first major
speech, delivered early this month.
“Many aren’t seeing significant increases in their take-home pay,”
Mr. Paulson said. “Their increases in wages are being eaten up by
high energy prices and rising health care costs, among others.”
At the same time, he said that the Bush administration was not
responsible for the situation, pointing out that inequality had been
increasing for many years. “It is neither fair nor useful,” Mr.
Paulson said, “to blame any political party.”
More information about the Marxism