Tuesday, October 03, 2006

World: Record low wage share, record high profits

A recent New York Times article highlighted the worsening lot of American workers as company profits soar over the tenure of the Bush administration.

Gross Domestic Product (GDP) is a standard for measuring a country's economic output. Wages as a proportion of GDP is a coarse measure of the share in the output that workers get. At 45% in the latest quarter, workers' share of wealth is the lowest on record, down from about 50% in early 2001. In the 60 years of records, workers' share was at its highest - at 53.6% - in 1970.

Conversely, corporate profit's share of GDP is at its highest since the 1960s.

This is the first sustained period of (US) economic growth since World War II that has failed to deliver real benefits to workers.

Included in the wages category are executives, who I believe are seeing their remuneration reflect corporate profit increases. I suspect if you discounted for top executives, the figures would be even worse. The median hourly wage has actually declined 2% in real terms since 2003 - especially notable at a time when productivity - the profit per worker - has steadily increased in that time.

What possible explanations are offered? Global trade, immigration, technology [productivity increases, by another name] are said to erode workers' bargaining power. Unions are much weaker, and the buying power of the minimum wage is at a 50-year low.

All this should ring alarm bells for Australians, as the Federal Government has recently introduced draconian industrial relations legislation, with the intent of mirroring the US experience.

A copy of the article can be read here.

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