[Marxism] Wage share lowest since at least 1947. Profit share greatest since 1960s. Minimum wage at 50-year low

Brian Shannon 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.

Brian Shannon
_______________

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  
period.

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  
billion.

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  
since 1966.

Over the last year, the value of employee benefits has risen only 3.4  
percent, while inflation has exceeded 4 percent, according to the  
Labor Department.

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  
coming months.

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  
and 80’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  
other group.”

. . .[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.”


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