Jun 6, 2019
Labor's shrinking share of profits
Dating back to the 1940s corporate profits and labor rose and fell together, reflecting the general growth of the economy, note economists at the St. Louis Fed:
"The past decade and a half seems to be different, though. Never have corporate profits outgrown employee compensation so clearly and for so long."
What's happening: Capital Economics chief economist Neil Shearing says the change has to do with a shift in incentives for decision makers at large companies.
- "There are a whole raft of structural shifts in the developed world over the last 30 years that have weakened the power of unions ... and basically shifted more of the share of income of labor to corporates and rather than being used for investment it's just jacked up share prices."
- "If you get to a world of more equal distribution of labor it ... would be terrible for the stock market, but it would help to address some of the more social, distributional type issues."
Go deeper: Walmart CEO calls on Congress to increase "lagging" federal minimum wage