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December 21, 2003

More Profits, Less Jobs & Wages

Louis Uchitelle at the Times highlights what a number of analysts have noted-- profits are rising even as wages stagnate:

The employment rolls are still smaller, by 2.4 million jobs, than they were at the recession's start in March 2001. Those who are employed are also feeling the squeeze, particularly the 85 million people who hold office or factory jobs below the rank of supervisor or manager. Their average hourly wage, $15.46, is up only 3 cents since July, according to the Bureau of Labor Statistics. That wage is rising at an annual rate of less than 2 percent, barely enough to keep up with inflation, mild as it now is.

...pretax profits skyrocketed in the third quarter, to nearly 30 percent of national income, at an annual rate, from 27 percent in the first quarter of 2001. And this despite the rising costs of health insurance, pensions and exercised stock options, all counted as labor income.

With no wage growth, the continued consumer spending has come at the expense of private savings, just as the government-driven spending comes at the expense of rising public debt:
The government revealed last week the dearth of savings is worse than first thought. Revised Commerce Department data showed Americans saved just 2.3 cents from every dollar earned after taxes in 2002 -- not the 3.7 percent previously reported and less than a third of the 7.7 percent saved in 1992.
The contrasting fortunes of profits and personal income show up in the personal versus business bankruptcies:
Data released Nov. 14 by the Administrative Office of the U.S. Courts show that personal bankruptcies grew 7.8 percent in the year that ended Sept. 30, to 1.63 million. Business bankruptcies, by contrast, fell 7.4 percent to 36,183.
Merry Christmas if you depend on wages for your income.

Posted by Nathan at December 21, 2003 05:58 AM