Freefall

by Matthew Stollak on Monday, November 28, 2011

In this weekend's New York Times, Floyd Norris highlighted the latest statistics for workers and corporations.  He writes:

In the eight decades before the recent recession, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent.

During the same period, there never was a quarter when wage and salary income amounted to less than 45 percent of the economy. Now the figure is below 44 percent.
Accompanying his article, were a number of charts, including the below to highlight his point:


For decades, the success of workers and corporations were intertwined.  As corporations did well and had high profitability, benefits expanded and wages increased.  A rising tide lifts all boats, right?

In the 1910s, Henry Ford knew if workers worked long hours at low pay, they could neither afford nor consume the product they were making.  So, he lowered the work day to 8 hours and the work week to 5 days, while offering $5 a day in wages (doubling wages).  Check out his thoughts here.

When did organizations decide that workers no longer deserved to share in the success of the organization?

2 comments

Is there a need to have a discussion on the impact a worker has on profits?

In other words - we needed x number of workers to get x profits. If I can get the same profit with less workers and pay them the same doesn't that give you the same results were seeing here?

Is it a function of a fundamental change in how US companies make their money and less of an indictment on the way in which companies spend their profits?

Also - pay is more an issue of what the market will bear - not what the companies "can" pay. The success of the company has some bearing on pay - but it is not a requirement - Apple is sitting on billions in cash - is that going to pay?

I think these stats are interesting but I wonder if they are relevant for the future economy in the US. We could have record profits, record employment and a wide disparity between profit growth and pay growth due to the fact that we are less "asset" based in our economy and more knowledge/creative/non-physical asset based... make sense?

by Paul Hebert on November 28, 2011 at 7:06 AM. #

Reminds me a little of that old story between Ford and the Union boss. Ford asks the union boss - 'Gee who will pay your union dues when we eventually replace the workers with robots?' Union boss replies, 'Gee, I don't know, but who will buy your cars then?'

by Steve Boese on November 28, 2011 at 6:22 PM. #

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