The triumph of capital over labor
- Felix Salmon, author of Axios Markets
Illustration: Aïda Amer/Axios
Tuesday's stock market record proves the definitive triumph of capital over labor in the era of COVID-19.
Why it matters: The recession has caused the size of the American economic pie to shrink substantially. But the share of that pie going to capital rather than labor has continued to rise.
Driving the news: The S&P 500 closed at a record high of 3,390 on Tuesday, a gain of 55% from its March low point in the space of just 105 trading sessions.
The big picture: It's easy to view the stock-market rally as happening despite the fact that more than 28 million Americans are claiming unemployment benefits. But perhaps the stock market is soaring in large part because of the continued unemployment crisis.
How it works: Historically, about two thirds of economic output went to workers in exchange for their labor, with the other third being retained by owners. But since 2000, that ratio has been plunging.
- Now that America's workforce has been decimated by the COVID-19 pandemic, the share of national income being kept by workers could hit a new record low.
The bottom line: It's unclear how or whether workers will be able to regroup and reclaim more of the fruits of their labor. So long as capital retains the upper hand, an increasing share of corporate revenues will show up as profits. Which is good news for anybody owning stocks.