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I had not seen this.....

The Wageless, Profitable Recovery
By STEVEN GREENHOUSE
Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth.

The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007-2009,” said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.

According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.

The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.

“The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma.

According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.

The authors said another factor explaining the weak performance for aggregate wages and salaries was the slow growth in weekly hours during the recovery. At the same time, worker productivity has grown just under 6 percent since the recovery began, helping to keep employment down while lifting corporate profits, the study said.

Professor Sum noted that the aggregate wage and salary figures exclude employer contributions to benefits and payroll taxes, while they include bonuses, overtime, commissions and tips.

He said that nonwage benefits rose in real terms by $27 billion during the first seven quarters of the recovery. “These small gains were exactly offset by a similar $27 billion loss in real wages and salaries over the same time period based on newly released data from the Bureau of Economic Analysis,” he said. “It was a wageless and jobless recovery.”

The study called that $27 billion loss in aggregate wages and salaries during the seven quarters after the recovery began “the first ever such decline in any post-World War II recovery.”

The study said that of the previous recoveries since the 1970s, the recovery following the 2000-1 recession was next worst in terms of the share of increased income going to wages and salaries. The study found that 15 percent of income growth went to aggregate wages and salaries in the six quarters after the recovery began following that recession, while 53 percent went to corporate profits. The growth in national income can also go to net interest, rental income or proprietors’ income.

The story was very different for the recovery that began in 1991. In that recovery, 50 percent of the growth in national income went to wages and salaries during the first six quarters after the recession ended, while corporate profits actually fell by 1 percent during that period.

With regard to corporate profits, the report noted that the preliminary estimate for the first quarter of 2011 was $1.668 trillion, an increase of $465 billion of just under 40 percent since the recovery began.

“Aggregate employment still has not increased above the trough quarter of 2009, and real hourly and weekly wages have been flat to modestly negative,” the report concludes. “The only major beneficiaries of the recovery have been corporate profits and the stock market and its shareholders.”

http://economix.blogs.nytimes.com/2011/06/30/the-wageless-profitable-recovery/



Why there is a deficit
Posted by WARREN MOSLER on July 26th, 2011

The main reason we have a large budget deficit is because of all the tax advantaged savings plans- pension funds, IRA’s, insurance and corporate reserve.

All of these financial assets, which compound continuously, represent unspent income.

And unless they are offset by some other agent spending that much more than his income, the dollars won’t be there to be saved in these tax advantaged entities.

And also realize this is an accounting identity, beyond dispute.
Like 1+1=2.
Like how your checkbook must balance or you made an arithmetic mistake.

It works like this:

People work to produce and sell goods and services and someone get the dollars from all those sales.
Those dollars that came from the sales are exactly the amount needed to buy those things in the first place.
If anyone doesn’t spend the dollars he gets from the sales, there isn’t enough spending for the sales to happen in the first place.

So when a large chunk of our dollars that we get paid from wages and profits go into pension funds,
and don’t get spent,
all the things for sale can’t get sold unless someone spends that much more than his income.

And if we (both residents and non residents) don’t want to- or can’t- spend more dollars than our dollar incomes by borrowing dollars to spend,
sales fall short,
so income and jobs are lost in a downward spiral,
that doesn’t end until someone finally fills that spending gap by spending more than his income
to replace the spending power lost when earned dollars go into pension funds.

That’s where the government comes in.
When those dollars piling up in pension funds cause spending to fall short,
government can spend more than its income to make up for that lost spending power, fill the spending gap, and keep everyone working and producing and selling real goods and services.

So right now the high unemployment and low sales tell us there is still a big spending gap to fill.
In the past, this spending gap might have been filled by people borrowing to spend on houses and cars and all that.
But this time around people aren’t willing or able to fill the spending gap.
The current level of government spending that exceeds taxes (deficit spending) is only partially filling the current spending gap.
It’s a big economy and pension funds and corporate reserves are huge and growing,
which means the spending gap is huge and growing
which means the amount government spends that’s more than it taxes (government deficit spending)
is still too small to fill the spending gap.

the answer is quite simple- cut taxes and/or increase government spending until output and employment is restored and the spending gap is filled.

Unfortunately our fearless leaders have a large gap between their ears, and have it all backwards, and we’re all paying the price.

And it will get a lot worse if they keep cutting the government deficit and make the spending gap wider instead of narrower.
http://moslereconomics.com/