Companion charts, drawn with data compiled by the St. Louis Federal Reserve and put together by Henry Blodget of Business Insider:
First, after-tax corporate profits as a share of gross domestic product:
Second, employee wages and salaries as a share of gross domestic product:
You can draw a variety of lessons and conclusions from such charts. But I’ll start with three:
1.) The notion that corporations are overtaxed and overregulated and can’t turn a profit is simply absurd. The whines of victimization from our titans of business have no basis in reality.
2.) The Great Recession, as tough as it is, does not account for the trends, which have occurred over several decades.
3.) You could argue that if the share of GDP devoted to wages and salaries has fallen to a record low, it’s because American workers have grown lazy and stupid. Given that the two charts change right around the time of Ronald Reagan’s inauguration, you could also argue that it is somehow being driven by changes in government policy.
I think both interpretations in Point 3 are wrong. The charts document a profound, permanent and probably ongoing shift of bargaining power from the employee to the employer, a shift that has been driven largely by synergies between technology and globalization, with government policies playing a minor role at best.
The question is what, if anything, we do about it.
– Jay Bookman