Wednesday, March 9, 2016

How Much Exploitation? : Labor's Share of Income

Source:  http://www.federalreserve.gov/econresdata/notes/feds-notes/2015/gifjpg/figura-ratner-fig3-20150608.png   


Even though the pie has been growing, the worker's share of the pie has been shrinking - under presidents of both parties. Capitalism: Broken and getting brokener. The chart is labor's share of national income.

The best is if you look at the chart, every gray bar is a recession. The labor share drops right around every recession. Now remember, this isn't in absolute dollars, but in the share of income. This means that capital owners use recessions to eliminate labor expenses. This is not labor expenses lowered in proportion to the downturn, but labor shed in excess of the downturn. If the recession was 3% of GDP decrease and the labor income decreased by 3%, there would be no decrease on the chart. Instead GDP dropped 3% and labor costs were decreased 6%, say. And with wage stickiness (people will not accept an absolute decrease in their take-home pay from the same employer) people lost their jobs and it was pocketed by capital.

Now, some people may point to technology as the driving factor - there is capital deepening as there are investments to technology and less people are needed to make the same amount of goods. The problem here is that even this is missing the point. Even when capitalism was working, labor gave up 30% of their working day for the owners. Now it is 40%. This is important, but it is just being conscious of your greater exploitation, not coming to terms with the fact of the exploitation.