Monday, June 13, 2011

Fun With Income Distribution

Talking Points Memo has a post about the declining share of labor in that big yummy gateau we all share as income. It's now the lowest it has been since 1948! Great work, Republican governments! And a few triangulating Democratic governments, too.

The graph attached to the post shows that the slice of cake going to workers is getting smaller and not recovering after a recession ends as it used to do.

You can click on the graph to see it bigger. I should note that how steep the decline looks is partly because of the scale picked for the vertical axis. But the decline is real. Workers are given a smaller slice than in the past, compared to the other recipients of income, those who live on interest income or on dividend income or on other forms of non-labor income.

Why this change? It could be that people are now more likely to be both workers and capitalists. Perhaps they get a second slice as capitalists? If that's the case, the developments are not quite as worrisome. But I doubt that "the ownership economy" is behind these changes. After all, most of the wealth middle-class people own is tied up in their houses and in their retirement plans, and we know what has happened to the values of those.

A more likely explanation is that this is the intended outcome, starting from the Reagan Revolution and continuing almost uninterrupted ever since. The tax codes were changed to benefit non-labor income, the progression of taxes were blunted, and the capitalists were offered a whole global market of workers who expected much less in income than American workers.

Juxtapose the above with this graph, from a Wall Street Journal blog post:

The profits shown in that graph only apply to the financial sector, true, and they are shown as a percentage of all profits, not as shares in the overall income distribution cake.

But those narrowly-defined profits seem to have recovered very nicely, thank you, after this most recent recession (which may not be quite over or which might be the first dip of a double-dip recession).

All this goes to show, I guess, that recklessness and greed pay even if crime does not.