Most research on rising economic inequality focuses on growing wage gaps between different groups of workers. But of course that is only part of the story. Just as important is the division of the national economic pie between profits going to capitalists and the “labor share” that includes all of the wages and benefits earned by workers. It’s a zero-sum game: the portion of the total national income that is not going to the workers goes to profits for capitalists.
In recent times, U.S. corporate profits have been going up at the expense of workers’ wages and fringe benefits. From 1979 through 2007, labor’s share of national income in the U.S. private sector decreased by six percentage points. What does that mean? Back in 1979, American workers claimed about 64% of national income, and if labor’s share had stayed at this level, the 120 million American workers employed in the private sector in 2007 would have received as a group an additional $600 billion in compensation. That is more than $5,000 extra per worker!
Where did that huge amount of money go instead of into workers’ wallets? It went to corporate profits, mostly benefiting very wealthy individuals. And things did not change with the recent economic recession. Although the big economic downturn of 2009 reduced corporate profits as a share of national income, the effect was short-lived. Since 2010, the golden age of swelling corporate profits has resumed. more...
Research to Improve Policy: The Scholars Strategy Network seeks to improve public policy and strengthen democracy by organizing scholars working in America's colleges and universities. SSN's founding director is Theda Skocpol, Victor S. Thomas Professor of Government and Sociology at Harvard University.