Happy belated Labor Day America: You’re earning a slightly bigger slice of the economic pie

Noted capitalist Mitt Romney labors to expand the American pie.
Noted capitalist Mitt Romney labors to expand the American pie.
Image: Reuters/Larry Downing
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American workers are clawing back their share of the country’s annual income, but still haven’t regained their ground from before the recession—or even the end of the 20th century.

In the second quarter of this year, wages and benefits earned by US workers equalled to just over 53.5% of all the income generated in the US during that period, far better than what that share amounted to this time last year (or two years ago).

That’s a big jump. Recall that one percentage point of national income today is equal to $186 billion, or $584 for every person in the US.

But these gains still pale in comparison to what workers pulled down four decades ago, before the decline of unionization, increasing use of technology, and global trade made human work relatively less valuable. These changes are at the heart of our discussions of income and wealth inequality in the new century.

Where is the rest of national income going, if not to workers?

Today, an increasing share of income is captured by the forces of capital. In other words, business and government earn more from investing in technology than they do from salaried humans. The share of US income accounted as profits to private enterprise—this definition includes corporations and skilled professionals filing as sole-proprietors (i.e. doctors, lawyers, athletes, and consultants)—has been rising on the back of this trend:

Hope you had a nice long weekend!