Profits Up, Wages Down…and What Economics Has to Say About That

January 27th, 2014 at 12:34 pm

Over at the NYT Economix blog.

But this figure showing unit labor and profit costs–the growth of profits and wages after netting out productivity growth–tells you much of what you need to know.  And that’s average, as opposed to median, compensation.


Source: BLS

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9 comments in reply to "Profits Up, Wages Down…and What Economics Has to Say About That"

  1. Robert Buttons says:

    The dip in profits circa Q3 2009 reversed SUSPICIOUSLY about the time the fed started buying MBS.

  2. Larry Signor says:

    “…we will be hard pressed to turn these wage trends around.”

    I agree. Investors and upper management have become accustomed to obscene profits and that expectation is going to be difficult to change. Perhaps, as Dean Baker suggests, a shorter work week would absorb enough labor slack to bring us to full employment, whatever that is. The lesson of this graph is that the distribution of income is vital for a viable and stable economy. The lesson of this phenomenon is that economics should be a core study for high school students. We have met the enemy and it is economic ignorance.

  3. John says:

    “…since the late 1960s, the share of low-wage workers with at least some college has increased from 17 percent to 46 percent.”

    Incredible! So much for the belief education is the road to success…….

    • Robert Buttons says:

      It has been estimated that 15% have the IQ to perform legitimate 4 year college coursework. Yet we send 50% to college. Charles Murray was lambasted for his correct prediction of the failure of college-for-all.

      • smith says:

        It has NOT been estimated that 15% have the IQ to perform legitimate 4 year college coursework.
        Writing in January 2007, Charles Murray wrote “it makes sense for only about 15% of the population, 25% if one stretches it, to get a college education.”
        However, the ever controversial Murray is hardly the last word in deciding who or how many should be entitled to a college education.

        A very separate issue from who should go to college is how to provide appropriate jobs for those who do attend.

        Some economists, Greg Mankiw for example, insist stagnant wages are a result of an undereducated workforce. The BLS (Bureau of Labor Statistics) on the other hand says most job openings, 2/3 require no college.

        This seems to have become a political hot potato because the BLS is no longer giving this very important and relevant aggregate info out in their quarterly overview of employment. I guess they don’t want anyone to know if everyone goes to college, there are no jobs waiting for them. There aren’t enough now those with just partial college. Also crosses them up with the non existent high skills and STEM shortage. Anyone, look into this, the numbers were there in the 2012 report.

  4. Perplexed says:

    Nicely done! Still wondering why you never mention Gabriel Palma’s work. Do you disagree with his conclusions or find his work unpersuasive for technical reasons?

  5. jerseycityjoan says:

    From your Times article: “The economist Lawrence Katz, an important thinker is this debate because of his deep contributions to the literature on education as a wage determinant, agrees: “The only moments we’ve had of broadly shared prosperity have been in tight labor markets.”

    Absent more individual and collective bargaining power for the vast majority of workers who lack it, some of whom have college degrees, we will be hard pressed to turn these wage trends around. Such power is not the only determinant of wages, but it may well be the most important and the one most sorely lacking.”

    Well, OK then, if tight labor markets are the way to prosperity, why are we on a completely different road?

    Is there any good reason that the Democratic Party is supporting changes to immigration laws that would almost doubling the number of green cards and temporary work visa given out each year in the Senate Immigration Reform bill?

    Why do we need another 3 million new foreign workers to come here each year?

    I am a Democrat who feels deserted by my Party. Are we going to give up the idea of a prosperous America for American citizens and decide instead to keep bringing in new people from overseas whose labor we do not need and whose costs for education, healthcare and eventual retirement will cannot afford?

    The various elements of what the Democratic Party wants do not add up. We cannot continue to import tens of millions of new workers every decade, many of whom were poor in their home countries and due to the loss of good jobs here, probably will remain poor in America.

    I understand we will get stuck with the illegal immigrants we have today. I am talking about future legal immigration, which we do have the power to change. We can put ourselves first. So why are we planning not to?

  6. Joseif says:

    It will be interesting to hear if the Fed will continue to reduce bond purchases in the face of 2 months of a slowing real estate market, a major cold snap, and trouble in Argentina, Turkey, and China. We’re going to know if Janet Yellen and the new administration is long-term oriented or myopic.

    • Robert Buttons says:

      Myopic is assuming an infinite balance sheet can be unwound without far-reaching complications..