Saturday, July 09, 2011

High Melt Rate of US Working Class

Which is melting away fastest: Arctic sea ice or the American working class?

Since 1990:

  • US corporate profits: +200%
  • corporate employee compensation: +20%
  • median family income: +2%

Since 2000:

  • US corporate profits: +80%
  • corporate employee compensation: +8%
  • median family income: -5%

(All figures are inflation-adjusted.)

Source: Sacramento Bee


King of the Road said...

Sources and details please? This may (or may not) be quite misleading. "Median family income" applies to a number representative of a single family. "Corporate employee compensation" would, I assume, apply to a single representative employee (or does it apply to the aggregate inflation adjusted earnings of all corporate employees?) "US corporate profits" is, I suspect, the aggregate of all corporate inflation adjusted profits.

For aggregated figures, we need to know other things. For example, with corporate profits, these would be divided among how many shareholders (keeping in mind that investors have the claim on the dividends and gains from funds that own corporations)? Without such details, the provided figures provide no useful information.

David Appell said...

I gave the source. These are obviously broad figures capturing broad trends. Would the details you're seeking change the big picture? Why does it matter how many shareholders the profits are divided up between? (In any case shareholders don't get the profits directly.) More at

King of the Road said...

I missed the source. Yes, of course it matters. If the corporations distribute their income to shareholders and that group is more widely distributed in 2010 than in 1990 or 2000 (which one would expect given the growth in 401k plans, among other things) then that would not necessarily be a negative thing (granting the predisposition for considering corporate profits as a negative thing in the first place).

Further, if their stock value increased, which it would if it had a similar earnings multiplier on average over the period and their profits increased) then one would need to account for where the added value of the stock went as well. Some would go to ESOP holders, 401k plan participants, private investors in stocks, etc.

As I said, it may not be misleading but, as presented, it's not possible to know.

Dano said...

KoR: the data David gave are not what you are talking about.




David Appell said...

Yes, but wouldn't such changes in the distribution of shareholders be reflected, approximately, in changes in median family income? I think they would.

Granted, the numbers I linked to are high-level and obviously omit many details of the economic changes of the last 20 years. If they're a first-order approximations, you seem to be asking for third-order corrections. That wasn't my purpose here -- nor do I think such detail is necessary to capture the vast changes in income distribution in the US in recent decades.

King of the Road said...

Maybe so but there are at least a couple of "one and a half order" adjustments I'd make. Tracking backward from the Sacramento Bee, we find that the data is from an Economist Magazine report of a study from BCA Research. But I'm not able to get to the source since they are a "for profit" (wonder how much?) enterprise.

But simply adjusting the numbers for population increases (which would rationally affect aggregate corporate profits) reduces 200% to 160% and 80% to 73%. I'm not trying to make the case that "nothing's wrong," but when making the case that something is, I think some specificity is important.

I am always skeptical when anyone with an axe to grind bandies about large round numbers. This holds true whether I tend to agree with the viewpoint being expressed or not.