neoliberal prosperity trickles down - NOT
Source Jim Devine
Date 11/08/06/11:22
As Corporate Profits Rise, Workers’ Income Declines

THESE are the worst of times for workers, and the best of times for
companies. At least that is one way to read the newly revised national
economic statistics.

The Commerce Department last week reduced its estimates of economic
growth in 2010 and early 2011. At the same time, it said corporate
income was much better than it had thought. Using newly available data
from 2009 corporate tax returns, the department raised its estimates
of corporate profits by 8.3 percent for 2009 and 10.8 percent for

The new figures indicate that corporate profits accounted for 14
percent of the total national income in 2010, the highest proportion
ever recorded. The previous peak, of 13.6 percent, was set in 1942
when the need for war materials filled the order books of companies at
the same time as the government imposed wage and price controls,
holding down the costs companies had to pay.

In the first quarter of 2011, the latest figures available, the new
estimates indicate corporate profits accounted for 14.2 percent of
national income, well above the 13.1 percent that had previously been

[eye-balling Norris' graph, there's been an upward trend in the share
of corporate profits since about 1980, with wiggles of course.]

The news is not so good for smaller enterprises. The government
category for many such businesses, known as proprietors and
partnerships, is based on the type of tax returns filed, and is not
completely accurate because some large enterprises file partnership
tax returns while some smaller ones file as corporations. But it is
generally used as a proxy for small business.

The latest figures indicate the smaller businesses’ share of national
income fell to a 17-year low of 7.7 percent in 2009, but recovered to
8.3 percent in 2010 and in the first quarter of this year.

[proprietors' income has been sliding as a percentage of the total
since 1950 or so, but there was a temporary recovery from 1980 or so
to about 2004.]

Employees have always received more than half the total national
income, until now. In 2010, the percentage of national income devoted
to wages and salaries fell to 49.9 percent, and it slipped a little
more to 49.6 percent in the first quarter of this year. That continued
decline may help explain the economic worries of many Americans who
have jobs but still fear they are falling behind.

[wage and salary income has been sliding as a fraction of the total
since 1980 or so.]

The figure for wages and salaries reflects only what employees are
directly paid, and does not include the cost paid by employers for
benefits, which has been steadily rising over the years. It is thus
not an accurate gauge from the point of view of employers, for whom a
dollar spent on health insurance premiums is no less real than one
spent on wages.

[benefits as a percent of the total rose up until the later 1990s and
and the trend has leveled off -- despite the hypertrophy of
health-care costs. Employers pay these costs (and pass them on the
employees) but they do not correspond to the benefits that the
employees receive.]

Adding the two categories together may provide a better view of the
share of national income going to workers or being spent for their

The 2010 total, of 62.1 percent, is not close to the record low share
of 54.5 percent, set in 1929, the first year for which numbers are
available. But it is the lowest for any full year since 1965. In the
first quarter of 2011, it slipped further, to 61.7 percent.

[with a flat trend in benefits since the late 1990s and a decline in
wage and salary incomes, the trend during this period is clearly
National income, as calculated by the Commerce Department, is similar
to gross domestic product but excludes some items, most notably an
estimate of depreciation. Besides the ones shown in the charts, there
are other categories included in national income, including rental
income and net interest income, so the figures shown do not add up to
100 percent.

One way to look at recent trends is to compare the total income
figures for 2010 with those of 2006, before the economy began to slide
into recession. In nominal dollars, not adjusted for inflation,
national income was 6.7 percent higher in 2010 — a gain that did not
come close to matching the 8.2 percent rise in the consumer price

Total employee compensation, including benefits, rose 6.6 percent,
although wages and salaries gained only 5.6 percent. Corporate profits
were 11.9 percent higher, while proprietors’ income was down 8.5
percent. Corporate profits more than kept up with inflation. Other
categories of income did not.

It can be misleading to look at shares of income without examining
their magnitude. A small share of a big pie may be larger than a big
share of a small pie. The record high share for wages and salaries, of
59.7 percent, came in 1932. Worker pay was plunging in those days, but
not as fast as corporate profits. Companies as a group lost money that

Nonetheless, President John F. Kennedy’s observation that a rising
tide lifts all boats is no longer as true as it once was.

There have been 10 years when corporate profits as a share of national
income exceeded 13 percent — 1941, ’42, ’43, ’50, ’51, ’55, ’65, ’66,
2006 and 2010. In eight of those years, the economy, as measured by
real gross national product, grew at a rate of greater than 6 percent.

The exceptions were 2006, when real growth was just 2.7 percent, and
2010, when it was 3 percent.

Similarly, in the past, unemployment was generally low when corporate
profits were high. In 2006, the unemployment rate ended the year at
4.4 percent — and that was higher than it had been in other postwar
years when the corporate share of national income was high. At the end
of 2010, the jobless rate was 9.4 percent. On Friday, the government
reported that the rate was 9.1 percent in July.

Floyd Norris comments on finance and economics in his blog at

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