Income inequality is going up.

From Occasional Links & Commentary.

Also see: Labor union decline, not computerization, main cause of rising corporate profits.

Kristal found that from 1979 through 2007, labor’s share of national income in the U.S. private sector decreased by six percentage points. This means that if labor’s share had stayed at its 1979 level (about 64 percent of national income), the 120 million American workers employed in the private sector in 2007 would have received as a group an additional $600 billion, or an average of more than $5,000 per worker, Kristal said.

“However, this huge amount of money did not go to the workers,” Kristal said. “Instead, it went to corporate profits, mostly benefiting very wealthy individuals.”

The question is: why did this happen?

“Some economists contend that computerization is the primary cause and that it has increased the productivity of machines and skilled workers, prompting firms to reduce their overall demand for labor, which resulted in the rise of corporate profits at the expense of workers’ compensation,” Kristal said. “But, if that were the case, and computerization was the principal cause for the decline in labor’s share of national income, then labor’s share should have declined in all economic sectors, reflecting the fact that computerization has occurred across the board in the past 30 to 40 years.”

This is not the case, however, as Kristal showed in her study, in which she considered data on 43 non-agricultural private industries and 451 manufacturing industries from 1969 through 2007.

“It was highly unionized industries — construction, manufacturing, and transportation — that saw a large decline in labor’s share of income,” Kristal said. “By contrast, in the lightly unionized industries of trade, finance, and services, workers’ share stayed relatively constant or even increased. So, what we have is a large decrease in labor’s share of income and a significant increase in capitalists’ share in industries where unionization declined, and hardly any change in industries where unions never had much of a presence. This suggests that waning unionization, which led to the erosion of rank-and file workers’ bargaining power, was the main force behind the decline in labor’s share of national income.”

2 thoughts on “Income inequality is going up.

  1. travis February 25, 2014 at 09:58

    What’s your view on primitivism (especially Godesky’s 30 theses

    • Francois Tremblay February 25, 2014 at 15:48

      Don’t worry, I’ll get around to answering my questions. I was just waiting to see if I was gonna get any more good ones, although so far it doesn’t seem like it.

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