[Sixstrings]

These charts tell you everything ya need to know..

Corporate profits:



Wages:



Worst employment number in 30 years:

[Plantagenet]

“It was the best of times, it was the worst of times.”
― Charles Dickens, A Tale of Two Cities

Interesting to see how Obama's economic policies are working out across the economy. So far its the best of times for the rich and the worse of times for the poor.

Ah well, Twas ever thus.

[GHung]

So who benefits the most from these corporate profits? While US households, collectively, still hold the largest share of equities, that share has dropped from 55.54% in 1990 to 37.92% in Q3 2012. See a pattern? 'Rest of world' has doubled from 6.87% to 13.44%.

Total market value (domestic equities) has jumped from $3.217 trillion (55.5% of GDP) to $19.698 trillion (124.6% of GDP) in the same period.

http://macromon.wordpress.com/2013/01/0 ... -market-2/

[copious.abundance]

The main reason for the large % of corporate profits as a % of GDP after 2000 is because of increasing amounts of overseas profits. An apples-to-apples chart would show corporate profits generated in the US as a % of (US) GDP.

[Loki]

The main reason for the large % of corporate profits as a % of GDP after 2000 is because of increasing amounts of overseas profits. An apples-to-apples chart would show corporate profits generated in the US as a % of (US) GDP.

No. A writer for Forbes, a notorious leftist rag, examined your contention and concluded:

The bottom line of this particular method of measuring the rise in corporate profits as a percentage of GDP is that a goodly part of it, at least 1 percentage point of GDP (and I’d probably argue higher than that, 1.5 to 2% but without much evidence), is simply that globalisation means that American based companies are earning greater profits abroad.

http://www.forbes.com/sites/timworstall ... alisation/

So even accounting for overseas profits, corporate profits as percent of GDP would still be at a historic high, exceeded only in the years immediately preceding the Great Recession.

There's an inverse correlation between the first two graphs, when corporate profits as percent of GDP goes up, wages as percent of GDP goes down. That's how it works.

Are you suggesting wages as percent of GDP is actually improving? And your evidence is? We've already had the discussion about the non-recovery of the labor market, shown by the third graph in the OP. No doubt another “lagging indicator,” i.e., more evidence for your 5% recovery.

[copious.abundance]

No.

Huh? Your own excerpt shows the writer agreeing with me:

The bottom line of this particular method of measuring the rise in corporate profits as a percentage of GDP is that a goodly part of it ... is simply that globalisation means that American based companies are earning greater profits abroad.

I didn't say anything about the wages issue. I suspect it has a lot to do with non-wage compensation, but that's not something I've looked into enough to have much of an opinion.

[copious.abundance]

I didn't say anything about the wages issue. I suspect it has a lot to do with non-wage compensation, but that's not something I've looked into enough to have much of an opinion.

Well, whad'a know, I was right!

Snapshots: Wages & Benefits: A Long-Term View

Figure 2 shows total employer costs for three forms of employee compensation as a share of GDP. The three compensation types we consider are: private group health benefits (the upper-most shaded region), wages/salaries (the bottom-most region), and other (non-private group health) benefits and payroll tax contributions (the middle region).5 Total compensation as a share of GDP is denoted by the topmost line and is a fairly stable over the period, ranging from about 56 percent to 59 percent. Although wages are consistently the largest component of worker compensation, the shares paid to employees for health benefits and other fringe benefits/payroll taxes have increased as a share of GDP, while the amount paid as wages has fallen. Health benefit costs have increased from 0.6 percent of GDP in 1960 to 3.8 percent in 2008. Fringe benefits other than health care and payroll taxes have also increased over this period, ranging from 3.8 percent of GDP in 1960 to 6.6 percent in 2008. Wages, meanwhile, have fallen from 51.8 percent of GDP in 1960 to 45.3 percent in 2008.

Damn I'm smart.

[Loki]

No.

Huh? Your own excerpt shows the writer agreeing with me:

The bottom line of this particular method of measuring the rise in corporate profits as a percentage of GDP is that a goodly part of it ... is simply that globalisation means that American based companies are earning greater profits abroad.

I didn't say anything about the wages issue. I suspect it has a lot to do with non-wage compensation, but that's not something I've looked into enough to have much of an opinion.

"Goodly" is not a number. He provided a number, it does not support your assertion about overseas profits. Yes he's making the same argument you are, only he took the trouble to quantify it instead of parroting a talking point. D minus for reading comprehension.

As for your second post, I don't see how employers paying more for their employees' health insurance makes anyone's life better, unless you're a health insurance executive. Which brings us back to the gross inequality of wealth produced by your Great Recovery.

[yellowcanoe]

[Figure 2 shows total employer costs for three forms of employee compensation as a share of GDP. The three compensation types we consider are: private group health benefits (the upper-most shaded region), wages/salaries (the bottom-most region), and other (non-private group health) benefits and payroll tax contributions (the middle region).5 Total compensation as a share of GDP is denoted by the topmost line and is a fairly stable over the period, ranging from about 56 percent to 59 percent. Although wages are consistently the largest component of worker compensation, the shares paid to employees for health benefits and other fringe benefits/payroll taxes have increased as a share of GDP, while the amount paid as wages has fallen. Health benefit costs have increased from 0.6 percent of GDP in 1960 to 3.8 percent in 2008. Fringe benefits other than health care and payroll taxes have also increased over this period, ranging from 3.8 percent of GDP in 1960 to 6.6 percent in 2008. Wages, meanwhile, have fallen from 51.8 percent of GDP in 1960 to 45.3 percent in 2008.
)

I guess what you are saying is that the millions of people who have part time minimum wage work with no benefits are just delusional and that in reality their employer is providing them with health coverage and other benefits.

[copious.abundance]

"Goodly" is not a number. He provided a number ...

Speaking of getting D minus for reading comprehension, YOUR link said "goodlie," not me. I said:

The main reason for the large % of corporate profits as a % of GDP after 2000 is because of increasing amounts of overseas profits.

I had no pretension of knowing any kind of exact amount, so I just said it was the "main" reason - exact quantity unknown. In fact, the title of your link says almost the exact same thing I said in my quote above:

Why Have Corporate Profits Been Rising As A Percentage Of GDP? Globalisation

So yes, he's saying the exact same thing I was. In fact he even agreed with me that the proper metric to look at would be to compare US-generated profits with US GDP.

As for your second post, I don't see how employers paying more for their employees' health insurance makes anyone's life better, unless you're a health insurance executive. Which brings us back to the gross inequality of wealth produced by your Great Recovery.

The fact that total compensation as a % of GDP has remained nearly constant over the past 54 years would indicate that, for whatever reason, there is some sort of natural limit of the country's output that can go toward employee compensation. Otherwise, over such a long period of time, you would see greater variability in this measure. That an increasing percentage of this is going toward health and other benefits may or may not be a good thing depending on how you view it: The tradeoff is, employers can give Americans fewer health benefits and more wages to make people like you happy, but they would probably end up spending the difference on health care out-of-pocket anyway. So in the aggregate it probably makes little difference. Lastly, that this trend has been going on for several decades indicates it has absolutely nothing to do with, "the gross inequality of wealth produced by your Great Recovery," but is instead a long-term, secular trend.

[copious.abundance]

I guess what you are saying is that the millions of people who have part time minimum wage work with no benefits are just delusional and that in reality their employer is providing them with health coverage and other benefits.

This had nothing to do with what I wrote. You might want to try actually reading it and comprehending it.

[Loki]

Oily, if you're going to dissemble, you're going to have to be a bit more subtle about it. From my original quote up thread: “a goodly part of it, at least 1 percentage point of GDP (and I’d probably argue higher than that, 1.5 to 2% but without much evidence).”

See those numbers after “goodly”? You must have read them since you quoted this exact same sentence, only without the numbers.

Explain how 1% (or at most 2% “without much evidence) is the "main reason” for the historic high in corporate profits as percent of GDP. Subtract 2% off the top of the OP's first chart and tell me what you see.

[copious.abundance]

Nice try, but epic fail. You accused me of not proving a number and using the word "goodly" instead of a hard number. But it was not me who used the word "goodly," it was YOUR OWN ARTICLE.

No.

Huh? Your own excerpt shows the writer agreeing with me:

The bottom line of this particular method of measuring the rise in corporate profits as a percentage of GDP is that a goodly part of it ... is simply that globalisation means that American based companies are earning greater profits abroad.

I didn't say anything about the wages issue. I suspect it has a lot to do with non-wage compensation, but that's not something I've looked into enough to have much of an opinion.

"Goodly" is not a number. He provided a number...

------------------------------------------------------
As for the 2% or so of GDP, if you subtract 2% of GDP from the top chart you will get something around the 0.09 line. Since the top line is around 0.11, that's actually a reduction of about 18%, which is a significant amount. Even half of that - 9% (leaving the chart at the 0.10 line) - would be a significant amount. As for the explanation of the rest, there is another relationship going on there which one can figure out if one looks at that chart while also looking at a chart of historical treasury yields. But I'll see if you can figure that one out all by yourself.

[copious.abundance]

I actually just read another reason which probably explains as much of the increase in CP portion of GDP as does globalization. Hint: "21st Century Economy."

[Loki]

Oily, I'll try to dumb it down since you seem to have a hard time with arithmetic.

(1) You made the claim that overseas profits are the “main reason” of the current high. I linked to an article making the same argument you're making about corporate profits as percent of GDP.

(2) The article stated 1%, maybe 2% at most (“without evidence”) of corporate profits as percent of GDP is due to overseas profits. Let's split the difference and call it 1.5%.

(3) Subtract 1.5% from the current 11.1% (as of 7/1/13), and we get 9.6%. A percentage exceeded only in a couple years preceding the Great Recession, and far out of balance compared to most of the rest of the post-WWII period. Please refer to chart #1 of the OP.

Are you following me? I know this is difficult math, but take the time to digest it.

11.1% - 1.5% = 9.6%. The median for the 1947-2013 time series is 6.2%. The data are readily available for your perusal.

This is a definitive sign of wealth inequality, a decadal-scale trend accelerated by the Great Recession. And, as you've agreed, not yet ameliorated by your Great Recovery.

We are not in disagreement my friend. We are only debating the microdetails of the 5% recovery. The 5% have recovered and then some, as shown by the statistics we both agree on.

[copious.abundance]

I don't know why you're repeating what I just wrote. The "0.09 line," of course being 9% and the "0.10 line" meaning 10%.

As for the 2% or so of GDP, if you subtract 2% of GDP from the top chart you will get something around the 0.09 line. Since the top line is around 0.11, that's actually a reduction of about 18%, which is a significant amount. Even half of that - 9% (leaving the chart at the 0.10 line) - would be a significant amount.

I await your responses to my inquiries on treasury yields and the "21st century economy." It actually has nothing to do with "wealth inequality."

[dorlomin]

The collapse of the post war social democratic consensus in the 80s is slowly coming home to roost. You create over capacity in the economy if you dont have a wealthy middle class to soak up production. This was one of the drivers of the great depression, over capacity leads to deflation.

We are back to swirling round the drainhole of deflation, hence the vast amounts of QE to keep money supply up.

But that sticking plaster cannot last forever. Without debt borrrowing and QE we will be back to deflation. The neoliberal (or Washington) consensus is falling apart.

Rob Pestons recent blog on China kinda puts the other side of this equation on the table.

Wages in the new economies are not growing fast enough to cover for falling wages in the west, they also are committed to debt (and infrastructure) spending to keep the wheels on.

Make hay and save while the sun shines folks, remember Aseop's grasshopper and ant.

[PrestonSturges]

“It was the best of times, it was the worst of times.”
― Charles Dickens, A Tale of Two Cities

Interesting to see how Obama's economic policies are working out across the economy. So far its the best of times for the rich and the worse of times for the poor.

Ah well, Twas ever thus.

Record profits, yet they have an insane hatred of Obama, claim they are being crushed under his heel.

I always figure it's a combination of prescription drugs, booze, senility, and inbreeding.

What's your excuse, Plant?

[Plantagenet]

....insane hatred of Obama....

Hi Preston:

Can you please stop posting this kind of thing about President Obama?

The man is doing his best to do a good job as President. O isn't perfect, but he's trying to do the right thing under difficult circumstances.

[careinke]

I used to be against a minimum wage pay raise, because I knew it would not help. I still do not think it will help, but I don't think it will hurt either, and it may help reduce consumption as prices rise.

The real problem is the disparity of pay between the lowest and highest paid in the corporation. Since corporations can only legally exist at the pleasure of the government, the government can legally set a pay rate.

So instead of a minimum wage, I would suggest the highest paid employee, counting all compensation, should not be allowed to make more than 50 times the amount of the lowest paid employee based on an hourly bases.

This helps reduce pay disparity as some CEO's now make 600 times more than their lowest paid employees. At the same time it does not limit how much the CEO makes, he just has to drag his employees along with him/her.

Civilizations have a habit of collapsing when wealth disparities become too great. This would be a relatively easy way to mitigate the wealth disparity we have today. A win win for both the rich and the poor.