We again have a cartoon, this time from Stuart Carlson, that I think sums things up nicely:
Surprise! Profits are still up to record levels and labor's share is still low--and it is happening just about everywhere, notes Jared Bernstein at the Economix blog. Meanwhile, Timothy Taylor offers some charts on the trend, including one on the wage-productivity gap:
In the Washington Post, Robert Samuelson summed up the issue of the ongoing debate over the shift of fortunes from labor to capital, saying:
The economy seems stuck in a self-defeating cycle: Weak consumer spending rationalizes weak investment spending; this keeps economic growth low and unemployment high, while putting downward pressure on labor’s income share.
We need to break this cycle. It’s possible...
What would improve the odds is more exuberance from the custodians of capital. CEOs seem content to sit on their profits and invest only when the needs and the returns are indisputable. Careless capital, which fostered the financial crisis, has given way to ultra-cautious capital, which is making a lackluster economy self-fulfilling.
Meanwhile, Annie Lowrey at the Economix blog looks at the latest data on rising income inequality, check out this chart:
The figures underscore that even after the recession the country remains in a new Gilded Age, with income as concentrated as it was in the years that preceded the Depression of the 1930s, if not more so.
High stock prices, rising home values and surging corporate profits have buoyed the recovery-era incomes of the most affluent Americans, with the incomes of the rest still weighed down by high unemployment and stagnant wages for many blue- and white-collar workers.
The New York Times Paul Krugman argues that while the current situation might be good for the super wealthy, it is bad for the country as a whole:
There’s intense debate on that point, with some economists still claiming that incredibly high incomes reflect comparably incredible contributions to the economy. I guess I’d note that a large proportion of those superhigh incomes come from the financial industry, which is, as you may remember, the industry that taxpayers had to bail out after its looming collapse threatened to take down the whole economy.
In any case, however, whatever is causing the growing concentration of income at the top, the effect of that concentration is to undermine all the values that define America. Year by year, we’re diverging from our ideals. Inherited privilege is crowding out equality of opportunity; the power of money is crowding out effective democracy.
There is also this piece in Pacific Standard from Eric Horowitz on how the attitudes of disadvantaged people shore up inequality that is worth reading. And this almost companion piece from Joshua Holland discusses research finding that the ultra-wealthy tend to be highly entitled.
The ongoing debate over minimum wages continues to focus on large employers like Walmart. This week a Demos report from last year on how raising wages might benefit retailers and the economy overall was the basis some counter-analysis by Robert VerBruggen at RealClearPolicy:
If Walmart pays less than other low-wage employers, as is often alleged, it will lose more money per employee from a minimum-wage hike. Walmart might make more profit on a marginal sale than it does overall. Complicated processes will unfold involving things like prices, profit margins, investment, hiring, turnover, and so on.
One last thing: In hunting down numbers for this post, I came across this study from Berkeley. It reports that if Walmart faced a minimum-wage hike, 41 percent of the workers who got raises would belong to families under 200 percent of the federal poverty level. And if Walmart passed the higher costs on to its customers, 28 percent of those costs would fall on families in that income range.
The researchers point out that each shopper would lose a small amount of money, while each employee would get a nice income boost. But we shouldn't forget that there's only a 13-point difference in poverty between the people who are paying more and the people who are getting raises.
Over at Yahoo Finance, Dean Baker takes the other point of view, this time looking at the fast food workers movement, saying that paying higher wages could have an economic cascade effect:
There are two other important points that must be kept in mind. Workers are pushing for a $15 an hour wage as part of a collective bargaining agreement, not a minimum wage law. Some employers will be better situated to meet this demand than others. Presumably the ones that can more easily absorb this cost will be the ones who will actually agree to pay workers $15 an hour.
The other point is that a full-time worker who sees her pay go from $7.25 an hour to $15 an hour will have another $15,000 to spend each year. This many may go to hire childcare workers for her children, home health care workers for parents, or be spent in thousands of other ways. Higher pay in the fast-food industry might lead to an economy in which we have fewer people working in the fast-food industry but many more people working in other industries.
Diana Furchgott-Roth at MarkertWatch looks at the activities of work centers on the nascent labor movement for fast food workers, arguing they may be skirting labor laws. Donald Luskin at Investor's Business Daily discusses how the labor market is stagnant in both directions:
The labor market is frozen now, with joblessness just as secure as employment. Yes, today you are less likely to lose your job than at any time since records started being kept in 1948. But if you don't have a job, you're very unlikely to get one.
In one sense it's a vicious circle. When it is so difficult to find a job, no one will risk leaving the job he has. And with no one willing to leave his job, there are fewer openings to accommodate the unemployed.
You may want to check out this scorecard on state policies for ensuring economic security from Wider Economic Opportunities for Women.
This interview with Ted Levinson, director of lending at RSF Social Finance in San Francisco, looks at the challenges of social finance. In the Pioneer Post, Steve Goldberg argues that social impact bonds "the won’t justify their extra cost or make economic sense until we have larger transactions."