Tuesday, March 5

Bad for the economy: Corporate profits at all-time highs, as worker wages stagnate

This is important: The U.S. economy is 'muddling along' with a reasonable amount of growth, but very little of the benefits of this GDP growth are inuring to ordinary working people. Instead, wages continue to stagnate, even as most employers continue to realize significant profits.

Take a look at the graph below. Wages as a share of GDP (blue) plummet, while corporate profits as a share of GDP (red) skyrocket:


This is *terrible* for the economy. Ultimately, this cycle cannot continue, because the very workers whose wages are stagnate are the ones who drive the profitability of corporations—by purchasing goods and services. If some of the economy's growth is not translated into higher wages for workers, any growth, regardless of how modest it may be, will stall.

Henry Ford understood this many years ago when he decided that his workers should make a solid living wage. Unfortunately, today, this seems to be a lesson we have forgotten.

Corporate Profits Are Eating the Economy (Atlantic)

3 comments:

  1. Zoom out, further...?
    http://marginalrevolution.com/marginalrevolution/2013/03/are-we-living-in-the-early-19th-century.html

    ReplyDelete
  2. I appreciate the linked article, but that is *such* a long-term view as to be of very little use during our lifetimes.

    ReplyDelete
  3. But even this graph is shadowed by the event that just proceeds it.

    ReplyDelete