[Marxism] CORPORATE profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years.

Louis Proyect lnp3 at panix.com
Sat Apr 5 07:20:46 MDT 2014

Go to 
to see accompanying graph.

NY Times, APRIL 5, 2014
Corporate Profits Grow and Wages Slide
Off the Charts


CORPORATE profits are at their highest level in at least 85 years. 
Employee compensation is at the lowest level in 65 years.

The Commerce Department last week estimated that corporations earned 
$2.1 trillion during 2013, and paid $419 billion in corporate taxes. The 
after-tax profit of $1.7 trillion amounted to 10 percent of gross 
domestic product during the year, the first full year it has been that 
high. In 2012, it was 9.7 percent, itself a record.

Until 2010, the highest level of after-tax profits ever recorded was 9.1 
percent, in 1929, the first year that the government began calculating 
the number.

Before taxes, corporate profits accounted for 12.5 percent of the total 
economy, tying the previous record that was set in 1942, when World War 
II pushed up profits for many companies. But in 1942, most of those 
profits were taxed away. The effective corporate tax rate was nearly 55 
percent, in sharp contrast to last year’s figure of under 20 percent.

The trend of higher profits and lower effective taxes has been gaining 
strength for years, but really picked up after the Great Recession 
temporarily depressed profits in 2009. The effective rate has been below 
20 percent in three of the last five years. Before 2009, the rate had 
not been that low since 1931.

The statutory top corporate tax rate in the United States is 35 percent, 
and corporations have been vigorously lobbying to reduce that, saying it 
puts them at a competitive disadvantage against companies based in other 
countries, where rates are lower. But there are myriad tax credits, 
deductions and preferences available, particularly to multinational 
companies, and the result is that effective tax rates have fallen for 
many companies.

The Commerce Department also said total wages and salaries last year 
amounted to $7.1 trillion, or 42.5 percent of the entire economy. That 
was down from 42.6 percent in 2012 and was lower than in any year 
previously measured.

Including the cost of employer-paid benefits, like health insurance and 
pensions, as well as the employer’s share of Social Security and 
Medicare contributions, the total cost of compensation was $8.9 
trillion, or 52.7 percent of G.D.P., down from 53 percent in 2012 and 
the lowest level since 1948.

In profit and compensation calculations, presidents are given credit for 
years in which they served for the majority of the year. Stock market 
gains reflect Standard & Poor’s 500 price changes from inauguration to 
end of term. For President Obama, they are through March 31. Recession 
shading indicates the economy was in recession during all or part of the 
year shown. *No figure is given for 1932 and 1933, which were years of 
corporate losses.

Benefits were a steadily rising cost for employers for many decades, but 
that trend seems to have ended. In 2013, the figure was 10.2 percent, 
the lowest since 2000.

One way to look at the current situation is to compare 2013 with 2006, 
the last full year before the recession began. Adjusted for inflation, 
corporate profits were 28 percent higher, before taxes, last year. But 
taxes were down by 21 percent,so after-tax profits were up by 36 
percent. At the same time, total employee compensation was up by 5 
percent, or less than the 7 percent increase in the working-age 
population over the same period.

Several reasons that have been offered as explanations for the declining 
share of national income going to workers, including the effects of 
globalization that have shifted some jobs to lower-paid overseas workers 
and the declining bargaining power of unions.

The accompanying charts compare President Obama’s administration with 
each of his predecessors, going back to Herbert Hoover. After-tax 
corporate profits in President Obama’s five years in office have 
averaged 9.3 percent of G.D.P. That is a full two percentage points 
higher than the 7.2 percent averages under Lyndon B. Johnson and George 
W. Bush, previously the presidents with the highest ratios of corporate 

The stock market has reflected that strong performance. Through the end 
of March, the Standard & Poor’s 500-stock index was up 133 percent since 
Mr. Obama’s inauguration in 2009. Of the 13 presidents since 1929, only 
Bill Clinton and Franklin D. Roosevelt saw a larger total increase. On 
an annualized basis, the Obama administration gains come to 17.7 percent 
a year, higher than any of the previous presidents. The figures reflect 
price changes, and are not adjusted for dividends or inflation.

More information about the Marxism mailing list