September 01, 2006
Productivity's Rise Not Equally Shared
The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.
As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”
– Real Wages Fail to Match a Rise in Productivity, New York Times
The rise in productivity, along with the rise in average income, has been touted as evidence of a booming economy — both nationally and in Minnesota. But this is not real prosperity, which we hold is sustainable and widely shared.
Instead, we are settling into a period in which the benefits of economic growth are flowing disproportionately to corporations and wealthy individuals. The resulting prosperity gap is perhaps wider than at any time since the Gilded Age.
See the data from an analysis by the Minnesota Budget Project. Over the past two decades, the top 20% of earners have grown income much faster than the bottom and middle. If you were to look further up in the top 10%, the growth rate is even more dramatic. Growth rates for the upper 1% would be far off the top of the chart.
“Average” state income growth is distorted by this big growth at the top. The Times article documents the same effect on a national scale and notes how most Americans are falling behind in this so-called economic recovery:
We calculate that approximately 25% of Minnesota's families are not making enough to meet their basic needs. Many more in the middle are affected by wage deflation as their cost of living outstrips growth in their income. Critics of our Invest for Real Prosperity strategy call raising taxes on high earners an unfair redistribution of wealth. That's nothing like the redistribution that has been quietly occurring over the past decade.Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department.
“There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings.
“And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”
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