Economic Snapshot: Why the Average American Worker Should By Making $3,770 More

From the Economic Policy Institute (EPI) comes the ever-important reminder of how the U.S. economy, for all its size and relatively robust growth, has failed to benefit the average worker.

Between 2000 and the second quarter of 2015, the share of income generated by corporations that went to workers’ wages (instead of going to capital incomes like profits) declined from 82.3 percent to 75.5 percent, as the figure shows. This 6.8 percentage-point decline in labor’s share of corporate income might not seem like a lot, but if labor’s share had not fallen this much, employees in the corporate sector would have $535 billion more in their paychecks today. If this amount was spread over the entire labor force (not just corporate sector employees) this would translate into a $3,770 raise for each worker.

Here is a visual of the data, which shows just how wide the gap is by historical standards.

As another recent EPI study found, this growing gap has occurred despite a steady growth in productivity; in other words, people are working as hard as they always have — if not harder — but getting a lot less compensation for it. Put in more technical terms, national income is shifting from labor compensation (where more Americans make money) to capital incomes (limited mostly to executives, investors, hedge fund managers, and other economic elites).

Basically, our economy works mostly for those at the top, the owners and managers of companies, properties, and other sources of capital. Their source of revenue is less taxed and regulated than that of the average worker; the financial sector has become, for obvious reasons, the place where more and more investments are going, at the expense of the average American. Rather than being complementary to other economic sectors — for example, as a source of capital for starting businesses — finance is becoming parasitic, drawing away revenue from workers and becoming increasingly inaccessible to all but the richest among us.

As this paper and other data clearly show, something has got to give. Most people are long overdue for an ultimately modest raise, and there is plenty of capital to go around…were it not being piled into investments that benefit only a small, elite slice of Americans (or stashed via complex financial instruments and offshore accounts).

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