Data released last week show that corporate profits in the fourth quarter of 2005 claimed the largest share of GDP in forty years. Not since the third quarter of 1966 have profits taken a larger chunk of the economy.
More alarming (for labor) is the abrupt acceleration in profit's share during the Bush years:
Since the third quarter of 2001 the share of GDP going to corporate profits has soared from 7.0 percent to 11.6 percent, while the share going to labor compensation declined by 2.4 percentage points.
The last few years should have been good ones for labor. Since February 2004 more than 4 million jobs have been created. Output per worker increased by 3.5 percent in 2004 and 2.7 percent last year. Yet the balance of power continued shifting from labor to capital. Not only did profits spike as a share of GDP, but real median income actually declined in 2003 and 2004 (the latest available year.)
Optimists insist that, in the long run, profits can only grow as fast as GDP. If this is true, then labor's declining income share is unsustainable, and will eventually "self correct." That's what we've seen historically.
But the foreign-born share of the labor force--15 percent in 2005--is also unprecedented. Since 2001 illegals have accounted for most of immigrant labor force growth.
Cheap immigrant labor induces only a nugatory increase in total native income. Its biggest impact, according to Harvard economist George Borjas, is to redistribute income from native workers to employers.
Recent data seem to confirm this. The construction industry is booming, home builders are racking up record profits, yet average construction wages have fallen between 15 percent and 35 percent across the country-the result of cheap immigrant labor.
Similarly, the service industries-restaurants, hotels, motels, cleaning companies, etc. - are major employers of immigrant labor. These industries are booming, creating wealth for executives and shareholders. But average real wages of service industry workers have declined since 2001.
Is rising income inequality unsustainable? Henry Ford certainly thought so. His decision to pay autoworkers $5 per day was predicated, in part, on the fear that ever declining labor shares would eventually shrink the market for autos.
But that was in 1914. We were a "closed economy" in which production and demand were overwhelmingly domestic. What was good for Ford workers was good for Ford, and vice-versa.
Arguably, the world today is run by a global elite who have more in common with each other than with the middle classes who happen to share their nationality and work in their factories.
Full article: http://www.vdare.com/rubenstein/060406_nd.htm
Posted by proutist-universal on April 14, 2006 12:55 PM | TrackBack
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"In economic life there is extreme inequality and exploitation. Although colonialism no longer exists openly in the political and economic sphere, still it persists indirectly, and this should not be tolerated... In this respect you should remember that in economic life, we will have to guarantee the minimum requirements of life to one and all... There cannot be any sort of adjustment as far as this point is concerned. The minimum purchasing requirement must be guaranteed to all. Today these fundamental essentialities are not being guaranteed. Rather, people are being guided by deceptive economic ideas like outdated Marxism, which has proven ineffective in practical life and has not been successfully implemented in any corner of the world. Why do people still believe in such a theory, which has never been proved successful? The time has come for people to make a proper assessment of whether they are being misguided or not." |
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"Human beings have still not been able to form a human society, and have still not learned to move with the spirit of a pilgrim. Although many small groups, motivated by self-interest, work together in particular situations, not even a small fraction of their work is done with a broader social motive. By strict definition, shall we have to declare that each small family unit is a society in itself? If going ahead in mutual adjustment only out of narrow self-interest or momentary self-seeking is called society, then in such a society, no provision can be made for the disabled, the diseased or the helpless, because in most cases nobody can benefit from them in any way... in that case there always remains the possibility of some people getting isolated from the collective. All human beings must attach themselves to others by the common bond of love and march forward hand in hand; then only will I proclaim it a society." |