I'd like to see this chart extended out prior to 1990. With all the stock option grants that were being given I think this chart has the potential to be scewed(sp?) in the 90s. If stock option packages are going up then profits are going down. When the stock options become worthless, profits go back up.

Stock options and how to give them out and in what amounts is a very different issue than how actual wages vary with corporate profits.

The part I found most interesting is that Clinton I also had more profits/lower wages, while in Clinton II the trend reversed. Is this just a natural part of the beginning of a recovery, or where there some real government actions in the mid-90s that reversed the trend?

I know Nathan will love this comment, but it seems to be correlated with the capital gains tax cut.

Doesn't it also correlate with the '96/'97
minimum wage increase?

It also correlates with the low unemployment of the late 90s. The more reserve workers without employment, the more companies can replace any worker who gets uppity and demands a wage increase.

This may not be as significant as it sounds because the 30-year version of this graph (page 21 of the pdf) shows that these percentages oscillate around more or less constant values. So the change from 2000 to 2003/2004 may be just be a "correction" for the oscillation of the previous few years. If this trend were to continue beyond 2004, then that would represent a change in the historical pattern.

Compensation increases every year, but corporate profits decrease in some years. (Businesses sometimes have negative profits, but they still pay their employees). As we go from reduced to expanded profits, the profit growth rate has to be greater than that of compensation (which is less volatile) to keep the long term averages.

The more interesting story in the data from which this graph was made is, I think, the tax on corporate profits. This has been reduced significantly in the past few years, which makes the increase in after-tax profits much greater than the increase in pretax profits.

After some copy/pasting into a spreadsheet, I got that the percentage growth from 1995 to 2003 was: GDP=50%, Compensation=48%, Before-Tax Profits=54%, After-TAx Profits=77%. Most of the tax benefit came in 2001, with a 24% reduction in tax rates (according to this data).

"...how corporate profits rise at the expense of wages:"

Well, that kinda depends on how one charts the same data. For instance a different impression may result if one charts 11% below 65% instead of above it (as if it were more) and/or puts movement in proportional terms.

E.g.:
http://www.mindspring.com/~jimglass/profitsandpay.htm