The Rest of the Story

Snapshot for May 27, 2004

When do workers get their share?
Despite recent good news on employment growth, the current economic recovery, now approaching its third year, remains the most unbalanced on record in respect to the distribution of income gains between corporate profits and labor compensation. Essentially, rapid gains in productivity have been translating into higher corporate profits without increasing the wage and salary income of American workers.

The chart below shows growth in corporate profits and total labor compensation (the sum of all paychecks and employee benefits in the U.S. economy) over the last 12 quarters; measuring profit growth since the peak of the last recovery in the first quarter of 2001.* [...]

*This recession/recovery period is also notable for being the first on record where corporate profits were higher in the trough quarter than in the peak quarter.
Source: National Income and Product Accounts (NIPA) from the Bureau of Economic Analysis (BEA).
This Snapshot was written by EPI economist Josh Bivens.

How Ya Like Them Apples

OMB Watch:
Recent data show a major shift in the balance between corporate income and labor compensation. As a share of the economy labor compensation has not been this low in almost 40 years (since 1966), and after-tax corporate profits are at the highest levels ever recorded by the Bureau of Economic Analysis.

Since it's peak in 2001, as a share of gross domestic product (GDP), labor compensation has decreased by about 4 percent (from 67 to 63 percent) and corporate profits have increased by about 4 percent (from 8 to 12 percent) — see chart below. After taxes, corporate profits reached 9.6 percent of GDP — the highest level recorded dating back to 1947. [...]

(Components are percent of GDP; source: graphic adopted from National Economic Trends, St. Louis Federal reserve.)

An interesting perspective on this is offered by Jonathan Evans, a UH-60 Blackhawk pilot, in his Livejournal post.  He does not write specifically about the recent Labor Department figures, but the principle is the same. 

A different perspective is offered by Christian E. Weller and Radha Chaurushiya in their article, Upside-Down' Economy Takes a Bite out of Middle Class Wallets. (See full report, the basis for their article, in this 247KB PDF)  They show the economic impact of the shrinking compensation for labor.  They add some insight into the implications of the fact that much of the economic recovery has been fueled by consumer credit.  As credit card defaults and mortgage foreclosures attain record levels, the prognosis for a sustainable recovery is dim. 

J. Bradford DeLong  echoes Paul Krugman's editorial  on job growth:

This means that it is way too early to think of Bush's economic policy as a good thing; and way to early to consider switching your vote to the Republican Party on economic grounds. 

Now, why, you might ask, is The Corpus Callosum interested in economics?  The answer is: I am interested in economics only when the economy is bad.  As an applied neuroscientist, a large part of my job is to keep people at work, or to get them back to work.  When everyone else's job is stressful, it makes my job more difficult.  The current economic conditions not only make for a tight job market; it makes existing jobs more stressful.  Although we can be proud of the fact that the US worker is the most productive, on average, in the world, and that the productivity of the US working is increasing, these statistics come with a cost.