[lbo-talk] A Disturbing Economic Trend in the USA

Doug Henwood dhenwood at panix.com
Thu Aug 11 08:13:06 PDT 2005


Wojtek Sokolowski wrote:


>Not necessarily - the 133,000 employment figure reflects, I believe only
>wage workers, and excluded self employed persons i.e. "independent"
>contractors that are becoming an increasing share of the labor force.

They're not, actually. The self-employed were almost 11% of total employment in the 1950s. That fell to around 7-8% in the 1960s-1980s, and it's now 6.7%.


>Moreover, the term "wage" does not equal "labor cost" the latter includes
>benefits, social security tax etc. It is my understanding that while the
>wages are stagnant or declining in real terms over time, labor cost is not
>due to increase of benefits (mainly cost of health insurance).

Yup, that's true.


>Another caveat is related to the composition of the GDP, which contrary to
>your stipulation includes three (not two) components: cost of labor, profits
>(i.e. remuneration of the owners of capital) as well as property income i.e.
>rents, interests, royalties, returns to investments - which include those
>earned by retirement accounts, therefore cannot be counted as income of the
>capitalist class alone. I would imagine that the latter are an increasing
>share of the GDP (Doug?), which by definition makes the share of wages
>smaller.

Geeky point first: the national income and product accounts, as their name suggests, consist of two sets of accounts, product on one side and income on the other. Income is earned in production. A worker gets paid for what s/he produces, and companies earn profits on what they produce. In theory the two sets of accounts should be equal; in practice, they're not quite, the difference being called the "statistical discrepancy." So what you list, labor income, profits, and property income are compoents of gross income, are on the income side. The product side of GDP is the classic formula C+I+G+X (consumption plus investment plus government spending plus net exports [which is exports less imports]).

Property income is now a bigger share of national income than it was from the 1940s though the 1970s, but it's off from the highs of the 1980s and 1990s. The major reason is that dividends are much less significant now than they were then. Straight wage & salary income was about 52% of GDP in the 1960s; it's now 47%. "Supplements" to wagesw and salaries - employer contributions to pension funds, social security taxes, and health insurance - are up, because social security taxes are up and, especially, health insurance premiums. Pension income, public and private, is also a larger share of GDP now than it was a few decades ago.

Doug



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