Tuesday, June 12, 2012
Ratio of corporate profits versus wages
This metric is useful because it illustrates how the benefit of increased productivity is shared between capital and labor. As the chart shows, the gains have been diverted to capital in recent decades. A key factor has been the large increase in global labor supply as China, and India entered the global economic system.
I don't think that this metric includes health benefit compensation for workers; if that were included the ratio would be lower as health premiums increase significantly every year.
I also expect corporate profits to plunge in the near term as lack of consumer demand and massive overcapacity in multiple industries take effect, and just based on the chart the ratio appears to be poised for a plunge.