Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

http://www.nytimes.com/2016/05/03/upshot/workers-are-getting-a-bit-more-of-the-economic-pie-and-shareholders-less.html?referer=

by Osiris30 • 10 years ago

49 34 10 years ago

nytimes.com

grej• 10 years ago

The article notes that a greater percentage of national income is going to workers now, which may very well be true according to how the accounting is done. However, how much of that is because many large corporations are booking a great deal of their profits outside of the US, reducing the denominator in kind of an artificial way? I didn't see anything in the article that mentioned the potential effects of corporations booking profits to overseas cost centers.

The chart the NYT shows depicts worker compensation percentage of national income. I'd be interested to see what overall worker compensation and overall corporate profits look like in inflation-adjusted terms, separately.

crpatino• 10 years ago

Another possibility is to look at the compensation for upper management. C-level officers are usually paid in stock as well as cash, but the staff reporting directly to them are salaried employees.

If you actually look at the graph (presented in the same article) it does not look like "the trend is reversing" at all. It rather looks like a very clear downwards trend with a strong cyclic component. So, when the times are good, the salaried bosses might just be handing out productivity bonuses to their reports, and passing the bill to the shareholders.

maxerickson• 10 years ago

Broad measures of wages are also showing growth.

jackcosgrove2• 10 years ago

Exactly, take away the cyclical component of the wage graph and it's still trending down.

No12• 10 years ago

C-level officers are usually paid in stock as well as cash, but the staff reporting directly to them are salaried employees.

A great point, but note that the writer considers C-level officers to be workers in this case. The headline might as well be Workers Pay Probably Keeping up with Inflation, Execs Doing Great, but that's not really news.

heimatau• 10 years ago

Very very true. I'm doing research on this.

Chart 3 demonstrates this clearly. Non-management workers are receiving less compensation. http://0-search.ebscohost.com.skyline.ucdenver.edu/login.asp...

- Note, sorry it's behind a pay wall.

Alt cite: MAGDOFF, F., & FOSTER, J. B. (2013). Class War and Labor's Declining Share. Monthly Review: An Independent Socialist Magazine, 64(10), 1.

EDIT: Was able to find a public link, through Google Scholar: http://search.proquest.com/openview/4be2b770b6d137e018c146e5...

eli_gottlieb• 10 years ago

Awesome. It's great to see that things like the Fight For 15 movement and the anti-collusion lawsuit in tech are having an impact.

As wages and compensation rise, it'll also be an interesting natural experiment to measure how private R&D spending responds. Productivity growth has been historically low these past few years, and only as short a while ago as 2012 or 2013 private R&D as a percentage of GDP was, according to my google-fu, quite low, while now it's higher.

If companies and the government could somewhat coordinate to see that the working-class demand-side of the economy improves its condition while the public and private sector spend money on R&D to improve productivity, the economy could stand a chance of acting remotely healthy some year soon.

djschnei8• 10 years ago

Ah the fixed-pie fallacy... A foundational pillar for so much of today's political rhetoric (on the right and left).

Retric2• 10 years ago

Many things like land or political power are fixed. So, income inequality really does have downsides even if the pie get's larger. How much is a 3 BR house in an area with good schools near you?

antisthenes• 10 years ago

It isn't a fallacy if you have even a basic understanding of economics.

Unfortunately, most of the layman discourse on the internet seems to blindly follow the mantra of an infinitely expanding economy.

While that may be true on an infinite timescale, in the short and medium runs (scale of economic cycles), the pie is indeed fixed.

djschnei8• 10 years ago

I'm a fellow at one of the largest economic think tanks in the world. I've been studying various schools for 25+ years. I have a basic understanding. "On an infinite timescale"? That is literally meaningless. Show me ANY time scale where the pie has been fixed and I'll go away.

fhrjfjc2• 10 years ago

It's fallacious to assume the contrary. You can transfer billions of dollars of capital in an instant by signing on the dotted line, but it takes decades to create that kind of value. The lumped sum analysis assumption for capital is valid in this case because the rate of capital transfer is many orders of magnitude greater than the rate of capital generation.

djschnei8• 10 years ago

Wow, haha... While you are able to spell "capital transfer" and "capital generation", you've proven your grasp on the ideas to be... suspect. I've never seen the relationship between arbitrary capital transfer rates and anecdotally slow CGRs as an argument trying to prove the existence of a fixed pie, so I guess that's inventive.

maxxxxx• 10 years ago

Can you elaborate what this has to do with fixed pie?

djschnei8• 10 years ago

I mean, it's right there in the title... "Workers are making more, must be at the expense of the shareholders (or visa versa)".

harryh2• 10 years ago

This has nothing to do with the fixed-pie fallacy. Of course both worker's incomes and shareholder gains can both increase by growing the pie. But at any given point in time there absolutely is a "piece" that goes to one and a piece that goes to the other. And it's interesting to look at how the relative sizes of those pieces change over time and what forces can drive those changes.

djschnei8• 10 years ago

We certainly agree. The voluntary, mutual, cooperation between employer and employee which creates a wage vs. profit interaction IS certainly fascinating. However, it is clear in not only the title of this submission but also the article itself that the fixed pie fallacy is at play.

Namrog84• 10 years ago

Maybe I am cynical or naive but if more automation and other things are causing fewer jobs. And then the remaining employees are getting paid more but there are fewer paid workers overall. But that'd cause a rise in compensation of those employeed.

Shouldn't this be done differently?

Tl;dr; let's fire/automate half the workers. Pay the rest more. And worker Compensation will skyrocket!

jackcosgrove2• 10 years ago

The article cited total pay and compensation as a proportion of the economic output. It does not mention median pay increasing for workers, so the situation you're describing may very well be the case.

collyw• 10 years ago

What work has actually been automated away? There is lots of talk about it but I don't see any real evidence of it.

As a developer, I can use a decent framework and modern tooling, and I can do what a team of 5 was capable of 10 -15 years ago. My work isn't vanishing. There is more of it if anything.

harryh2• 10 years ago

Tl;dr; let's fire/automate half the workers. Pay the rest more. And worker Compensation will skyrocket!

Compensation per worker might skyrocket, but total compensation paid to workers would not. This story is about the latter.

x2398dh1• 10 years ago

There are no error bars on this chart, and the deviation is so small as a percentage of the total change, that we have no way of knowing if this is signal or noise, so the article is somewhat pointless.

cmdrfred• 10 years ago

Isn't this phenomenon consistent this this?[0]

[0] http://www.ibtimes.com/ceo-pay-corporate-executives-got-rais...

6stringmerc• 10 years ago

The evidence available so far in 2016 — steady growth in wages and weak earnings for publicly traded companies — suggests that the reversal is continuing this year.

...uhh...the evidence of weak earnings while equities continue to go up, buoyed by systemic cash-infusions by several central banks (Fed, EU, BoJ), shows the entire system is broken. I wonder what the chart would look like between corporate expenditures on payroll vs. stock buybacks since 2008. Just a hunch, but I'd guess percentage wise the investor class is doing just effin' peachy in these conditions.

Okay, I found a few numbers to kick around.

Here's one little tidbit from the article:

For example, average hourly earnings for nonmanagerial private sector workers rose 2.56 percent in 2015 in a year of very low inflation

...and for contrast, the amount of capital deployed in buyback programs recently:

S&P showed more data signaling that S&P 500 index members increased their buyback totals by 16.3% to $553.3 billion in 2014, versus $475.6 billion in 2013.

Hm.

mathattack• 10 years ago

2 observations...

1) I recall being in an investors meeting in 2007 where the downward trend was pushed as a good thing. (If you're a shareholder, you want to keep the $)

2) The last time it went back towards the workers was during the recession. This tells me that it's more of a story of corporate profit growth than how much people are able to capture. (Corporate profits have more volatility than compensation)

No12• 10 years ago

After all, the pay for C.E.O.s and other highly paid people counts in those compensation numbers.

Most people consider workers to be rank-and-file employees, not executives. The writer goes on to discount the effect of executive pay on the numbers, but the methodology is far less than scientific, and doesn't really justify the headline.

redwood• 10 years ago

Doesn't change the fact that investment returns are still getting very generous tax treatment...

Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

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