Since 1990, Corporate Profits Up 200%, Household Income Up 2% - BCA

[Toro]

It has been the best of times for corporate profits, but rather less so for consumer incomes. Corporate earnings have soared 200% since 1990 while real median family incomes have increased by only 2%.

These data come from a recent article entitled, "High Profit Margins and Stagnant Real Incomes: Is Capitalism Working Properly?"

It didn't appear in The Nation but rather in The Bank Credit Analyst, the highly respected, long-time financial and economic research service that would never be thought of as some hotbed of populist fervor. And the author is not Michael Moore but Martin Barnes, the Bank Credit Analyst's long-time managing editor and self-described "dour Scot."

Moreover, rather than calling for a storming of the ramparts, Barnes poses questions of concern for the most self-interested of capitalists. Can the current high level of profit margins be maintained? Even more basically, can the corporate sector continue to prosper while the average consumer struggles?

What's stunning about the current cycle is that, despite a weak economic recovery, profit margins are near historic highs, albeit short of their historic peak in 2005. A major driver has been earnings from abroad, which have increased to 35% of total U.S. company profits from 20% since 1999. …

Bottom line, the main factors that have propelled corporate profits—cost-cutting, financial profits and overseas earnings—are waning. Even so, companies have done a far sight better than workers, as noted earlier. Since 2000, they've fallen even further behind; profits are up 70% while real median family incomes are down 2%.

Part of that has been because consumer prices have risen faster than corporate selling prices, which reflect costs of capital goods which have been held down by technology, Barnes notes. "However, it seems clear that labor has not received its fair share in recent years, even when using corporate prices," he adds, falling 4% short of what would be expected based on productivity gains.

"Ultimately, the health of the corporate sector depends on the financial health of its customers. Thus, the divergence between rising profits and weak growth in real consumer incomes will have to change," Barnes asserts.

Corporate Profit Gains at Labor's Expense May be Hitting Limit - Barrons.com

 

[Sallow]

Yep.

That deregulation low tax thing is working just fine.

Just as Conservatives planned.

 

[Toro]

BCA attributes the increase in corporate profits to an increase of corporate profits from abroad, rising from 20% of total profits in 1990 to 35% today, partly due to a weakening dollar; an increase in financial profits; and aggressive tax avoidance schemes, some of which are egregious and should be shut down IMHO.

 

[PLYMCO_PILGRIM]

It has been the best of times for corporate profits, but rather less so for consumer incomes. Corporate earnings have soared 200% since 1990 while real median family incomes have increased by only 2%.

These data come from a recent article entitled, "High Profit Margins and Stagnant Real Incomes: Is Capitalism Working Properly?"

It didn't appear in The Nation but rather in The Bank Credit Analyst, the highly respected, long-time financial and economic research service that would never be thought of as some hotbed of populist fervor. And the author is not Michael Moore but Martin Barnes, the Bank Credit Analyst's long-time managing editor and self-described "dour Scot."

Moreover, rather than calling for a storming of the ramparts, Barnes poses questions of concern for the most self-interested of capitalists. Can the current high level of profit margins be maintained? Even more basically, can the corporate sector continue to prosper while the average consumer struggles?

What's stunning about the current cycle is that, despite a weak economic recovery, profit margins are near historic highs, albeit short of their historic peak in 2005. A major driver has been earnings from abroad, which have increased to 35% of total U.S. company profits from 20% since 1999. …

Bottom line, the main factors that have propelled corporate profits—cost-cutting, financial profits and overseas earnings—are waning. Even so, companies have done a far sight better than workers, as noted earlier. Since 2000, they've fallen even further behind; profits are up 70% while real median family incomes are down 2%.

Part of that has been because consumer prices have risen faster than corporate selling prices, which reflect costs of capital goods which have been held down by technology, Barnes notes. "However, it seems clear that labor has not received its fair share in recent years, even when using corporate prices," he adds, falling 4% short of what would be expected based on productivity gains.

"Ultimately, the health of the corporate sector depends on the financial health of its customers. Thus, the divergence between rising profits and weak growth in real consumer incomes will have to change," Barnes asserts.

Corporate Profit Gains at Labor's Expense May be Hitting Limit - Barrons.com

So thats why we had to take money from the individual taxpayers and give it to big corporatoins. Now I get Obama/Bush's TARP/BAILOUTS/Stimulus spending /sarcasm

 

[CrusaderFrank]

What do you think this metric means?

 

[Mad Scientist]

What do you think this metric means?

Get rid of NAFTA and GATT, impose tariffs.

 

[CrusaderFrank]

Does it take into account the recent successes of Obama's and Democrats Progressive Jihad on Free Enterprise that has driven record numbers into poverty and food stamps?

 

[expat_panama]

BCA attributes the increase in corporate profits to an increase of corporate profits from abroad...

--or so says the Barrons pundit. None of the BCA website and Martin Barnes hits have the original article. Assuming Barrons isn't making this up and there really was an article, then it would contradict BEA numbers showing that since 1990 corp profits tripled with worker pay doubling --part of the general long term productivity uptrend.

OK, so lot's of loony lefties hate America's rich so much that they'd prefer things like they were in 1990 with no increases for anyone, but they're morons.

 

[kiwiman127]

I'll go with the Department of Labor's Statistics.

The Specter of Wage Declines

Today’s jobs report is not as encouraging on wages as it is on jobs. That’s something of a reversal: for most of the past three years, the wage trends have been better than the employment trends. The economy could now be headed into a period in which unemployment is falling but wages are not keeping with inflation.

Back in 2008, in the early stages of the recession, average hourly wages were still rising more than 3 percent a year. In 2009, wage growth slowed, to about 2 percent, but inflation was nonexistent. In fact, prices were falling for much of the year, causing real wages to rise for most workers. In 2010, wage growth slowed further, to less than 2 percent, but inflation was still only 1.5 percent
<snip>
Inflation is now picking up, because oil and food prices have jumped. Wages have not picked up. They grew just 1.7 percent over the last year, the Labor Department said today. If the job market continues to strengthen, wage growth will accelerate. But it may not do so fast enough to keep up with oil and food prices. With the unemployment rate close to 9 percent, most employers don&#8217;t have to offer big raises to keep their workers &#8212; which is why the Federal Reserve should be much more worried about the economy being too weak than about it being too strong.

The chart shows annual inflation versus annual average wage growth, since the recession began in December 2007. When the gray line is above the red line, it means wages grew faster than inflation over the previous 12 months. When the red line is above the gray line, it means inflation outpaced wages
http://economix.blogs.nytimes.com/2011/03/04/the-specter-of-wage-declines/
Click on the chart to enlarge:

 

[Toro]

BCA attributes the increase in corporate profits to an increase of corporate profits from abroad...

--or so says the Barrons pundit. None of the BCA website and Martin Barnes hits have the original article. Assuming Barrons isn't making this up and there really was an article, then it would contradict BEA numbers showing that since 1990 corp profits tripled with worker pay doubling --part of the general long term productivity uptrend.

OK, so lot's of loony lefties hate America's rich so much that they'd prefer things like they were in 1990 with no increases for anyone, but they're morons.

Frankly, it surprised me a little bit as well.

I believe household income comes from the Census data. This is median household income.

I'm not sure what "worker pay" is in your graph. But there can be different explanations for the discrepancies, including

- your graph is total pay, not per capita pay
- an acceleration in household formation.
- widening income disparities, which has been occurring
- differing definitions of "income," i.e. personal disposable income does not include healthcare premiums, which has been rising faster than incomes and is compensation

It should also be noted that Barnes (I believe) compares total corporate profits to median household income, which is a per capita measurement. By this standard, the two will always be mismatched.

However, it is true that corporate profit margins are near all time highs, which means that shareholders are capturing a greater share of economic wealth. This should normalize over time in a truly free market economy, given that high profitability should attract new capital into the economy, hence the title "Is Capitalism Working Properly?" It isn't just in the US, either. Global corporate profits have been rising relative to total output for the past decade. Barnes isn't the only one making this argument. Jeremy Grantham has been making the same argument for some time.

 

[Toro]

What do you think this metric means?

Practically, what it means is that if a small portion of the population is capturing an increasing amount of incremental gains, then leftist/populist policies will be popular. That's why polls show 60%-70% of the population are in favour of raising taxes on "the rich." If people can't get their gains out of the economic arena, they will do so in the political arena.

 

[boedicca]

Do the income figures include transfer payments via the tax process?

I doubt it.

 

[Truthmatters]

Capitalism has to be tempered by good tax policy and decent laws.


If the right would stop this idiot montra about "tax cuts" and "deregulation" is the answer to everything then we could make this system work for all people.

They refuse and the resaon they refuse is they want more of what you see here in the OP.

The really sad thing is everyday cons have been conned by these people into voting for the distruction of our governments ability to make capitalism work for all.

 

[boedicca]

WE don't have Real Capitalism in the U.S. any longer, you dim bulb.

Big Government Cronyism is Not Capitalism.

 

[kiwiman127]

Or there's these numbers by the Department of Labor.

REAL WAGES
1964-2004
Average Weekly Earnings (in 1982 constant dollars)
For all private nonfarm workers
Year Real $ Change
1964 302.52
1965 310.46 2.62%
1966 312.83 0.76%
1967 311.30 -0.49%
1968 315.37 1.31%
1969 316.93 0.49%
1970 312.94 -1.26%
1971 318.05 1.63%
1972 331.59 4.26%
1973 331.39 -0.06%
1974 314.94 -4.96%
1975 305.16 -3.11%
1976 309.61 1.46%
1977 310.99 0.45%
1978 310.41 -0.19%
1979 298.87 -3.72%
1980 281.27 -5.89%
1981 277.35 -1.39%
1982 272.74 -1.66%
1983 277.50 1.75%
1984 279.22 0.62%
1985 276.23 -1.07%
1986 276.11 -0.04%
1987 272.88 -1.17%
1988 270.32 -0.94%
1989 267.27 -1.13%
1990 262.43 -1.81%
1991 258.34 -1.56%
1992 257.95 -0.15%
1993 258.12 0.07%
1994 259.97 0.72%
1995 258.43 -0.59%
1996 259.58 0.44%
1997 265.22 2.17%
1998 271.87 2.51%
1999 274.64 1.02%
2000 275.62 0.36%
2001 275.38 -0.09%
2002 278.91 1.28%
2003 279.94 0.37%
2004 277.57 -0.84%



Source: U.S. Bureau of Labor Statistics

 

[Toro]

Do the income figures include transfer payments via the tax process?

I doubt it.

Yes it does.

Current Population Survey (CPS) - Definitions and Explanations

 

[Flopper]

It's easy to see why corporations are profiting while family income is going down the tubes. The big guys like Walmart, McDonald's are drawing increasing profits from abroad. Many corporations now are manufacturing abroad and selling globally escaping US taxes and high labor costs They've laid off, outsourced, or downsized everything on two feet trying to maximizer profits.

 

[Wiseacre]

I think this is an apples to oranges argument. Over 20 years we've had significant population growth, so a continuous flow of people coming in at the bottom of the income ladder. Those who increase their skill set, start a business, or otherwise earn more money move up the income ladder, many of today's middle and upper income people were on the low end back in 1990. So of course the per capita household income is going to be fairly stagnant, why would you expect otherwise?

Corp profits are a prerequisite to staying in business. You make money or you're history. Anybody know how they determined this number? So tell me, how much profit do you need to make per year to get to 200% over 20 years? That's not a rhetorical question, I don't really know. What I do know is that money flows to where it can make the most return on investment (ROI). So over the long term you better be doing a lot better than just treading water. One wonders if it included the startups and other businesses that went belly up. Over the past 20 years US companies have greatly expanded overseas, thanks in part to an increasingly poor business environment here but also due to lower costs elsewhere and being closer to emerging markets worldwide.

There's no big mystery here. And it doesn't mean a damn thing. Look at the last few years, household income has done nothing or maybe even declined, yet business profits are good cuz American businessmen know how to cut back on costs to make a profit.

 

[Truthmatters]

Or there's these numbers by the Department of Labor.

REAL WAGES
1964-2004
Average Weekly Earnings (in 1982 constant dollars)
For all private nonfarm workers
Year Real $ Change
1964 302.52
1965 310.46 2.62%
1966 312.83 0.76%
1967 311.30 -0.49%
1968 315.37 1.31%
1969 316.93 0.49%
1970 312.94 -1.26%
1971 318.05 1.63%
1972 331.59 4.26%
1973 331.39 -0.06%
1974 314.94 -4.96%
1975 305.16 -3.11%
1976 309.61 1.46%
1977 310.99 0.45%
1978 310.41 -0.19%
1979 298.87 -3.72%
1980 281.27 -5.89%
1981 277.35 -1.39%
1982 272.74 -1.66%
1983 277.50 1.75%
1984 279.22 0.62%
1985 276.23 -1.07%
1986 276.11 -0.04%
1987 272.88 -1.17%
1988 270.32 -0.94%
1989 267.27 -1.13%
1990 262.43 -1.81%
1991 258.34 -1.56%
1992 257.95 -0.15%
1993 258.12 0.07%
1994 259.97 0.72%
1995 258.43 -0.59%
1996 259.58 0.44%
1997 265.22 2.17%
1998 271.87 2.51%
1999 274.64 1.02%
2000 275.62 0.36%
2001 275.38 -0.09%
2002 278.91 1.28%
2003 279.94 0.37%
2004 277.57 -0.84%



Source: U.S. Bureau of Labor Statistics

wow those numbers look pretty interesting when you plug in who was president.

 

[PLYMCO_PILGRIM]

Or there's these numbers by the Department of Labor.

REAL WAGES
1964-2004
Average Weekly Earnings (in 1982 constant dollars)
For all private nonfarm workers
Year Real $ Change
1964 302.52
1965 310.46 2.62%
1966 312.83 0.76%
1967 311.30 -0.49%
1968 315.37 1.31%
1969 316.93 0.49%
1970 312.94 -1.26%
1971 318.05 1.63%
1972 331.59 4.26%
1973 331.39 -0.06%
1974 314.94 -4.96%
1975 305.16 -3.11%
1976 309.61 1.46%
1977 310.99 0.45%
1978 310.41 -0.19%
1979 298.87 -3.72%
1980 281.27 -5.89%
1981 277.35 -1.39%
1982 272.74 -1.66%
1983 277.50 1.75%
1984 279.22 0.62%
1985 276.23 -1.07%
1986 276.11 -0.04%
1987 272.88 -1.17%
1988 270.32 -0.94%
1989 267.27 -1.13%
1990 262.43 -1.81%
1991 258.34 -1.56%
1992 257.95 -0.15%
1993 258.12 0.07%
1994 259.97 0.72%
1995 258.43 -0.59%
1996 259.58 0.44%
1997 265.22 2.17%
1998 271.87 2.51%
1999 274.64 1.02%
2000 275.62 0.36%
2001 275.38 -0.09%
2002 278.91 1.28%
2003 279.94 0.37%
2004 277.57 -0.84%



Source: U.S. Bureau of Labor Statistics

wow those numbers look pretty interesting when you plug in who was president.

they look even more intersting when you plug in what was going on in the economy during those times .

Hey look bush has a net positive, lol.