Dividing the pie

Catherine Rampell over at the NYT has an important blog post about the changing split of GDP between labor and capital. Labor has seen its share of GDP fall about 5 percentage points (from about 60% to about 55%) over the last 30 years. GDP per capita is about $47,000, so 5% would be about $2,350 per person, or $9,400 per year for a family of four. Increasing the median family’s income from $50,000 per year to $60,000 per year would be a big deal.

So where’s the money going if not to labor? Corporate profits (which bounce around a lot) have been increasing. And I assume that other capital income must make up the difference (interest, rent, etc.).

It’s always illustrative to remember that while economics is a positive sum game over the long haul (we can grow the pie) it is often a zero sum game in the short run (who gets a bigger slice of the existing pie). In the past 30 years, corporations and those who both own them and run them have been making sure they get a bigger and bigger slice of the pie, no matter its size.


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