Friday, September 28, 2012


David Dayen, at FireDogLake, takes note of a Felix Salmon post, using a data study published by the Cleveland Federal Reserve, on the plummeting share of income going to Labor. Felix Salmon notes the paradoxical trend:
Over the past three years or so, wages and salaries have been rising steadily, while interest rates have been stuck at zero. It’s never been harder to make income from capital, while incomes for people with jobs have actually kept on rising. And unemployment, while still high, has been coming down. Given all that, it would stand to reason that the share of national income going to labor should be rising, not falling. Labor incomes are going up, the number of employed people is going up, and income from savings is going down. And yet! It turns out that people with capital are so rich, and getting so much richer, that it’s not even close
. Dayen's comment:
Something happened around 2000 that separated capital income from the historical norm. It started rising at spectacular levels. I would argue that all the different deregulatory policies of the Clinton Administration’s second term – the Commodity Futures Modernization Act, the repeal of Glass-Steagall – and the general laissez-faire attitude to regulatory policy from both Alan Greenspan’s Federal Reserve and the incoming Bush Administration created a runaway environment for capital that has not abated. Furthermore, capital gains tax rates were slashed in 2001 to 15%, after going down from 28% to 20% in Clinton’s second term. Finally, you have the internationalization of finance . . .

1 comment:

  1. Bruce -- from the chart it looks like the labor share tracks general unemployment/economic conditions better than it does financial deregulation. It goes up in the 60s, down in the 70s through the Volcker/Reagan recession and aftermath, gets a boost again in the overheated labor markets of the late 90s, and trends down in the 00s. The decline since 2000 looks precipitous since it reaches a new low but looks roughly comparable to the 70s-early 80s decline. Is this a pure bargaining power story?