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Corporate Margins And Profits Are Increasing, But Workers’ Wages Aren’t

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Image: Pat GarofaloAs we’ve been noting, corporate profits have made it back to their pre-recession heights (even if corporate tax revenue hasn’t followed suit). In fact, in 2011, corporate profits hit their highest level since 1950. But as Bloomberg News noted today, this hasn’t translated into wage growth or more purchasing power for workers:

Companies are improving margins and generating profits as wage growth for the American worker lags behind the prices of goods and services…While benefiting the bottom line for businesses, the decline in inflation-adjusted wages bodes ill for the sustainability of economic growth as consumers may eventually be forced to cut back. […]

Of the 394 companies in the Standard & Poor’s 500 Index that have reported since Jan. 9, earnings for the quarter ended Dec. 31 increased 5.1 percent on average and beat analyst estimates by 3.2 percent. Some 70 percent of the companies have posted better-than-projected results.

This pattern has become all too familiar during the slow economic recovery. In fact, real wages fell in 2011, despite record corporate profits. “There’s never been a postwar era in which unemployment has been this high for this long,” explained labor economist Gary Burtless. “Workers are in a very weak bargaining position.”

Between 2009 and 2011, 88 percent of national income growth went to corporate profits, while just 1 percent went to wages, a stat that is “historically unprecedented.”

This blog originally appeared in ThinkProgress on February 22, 2012. Reprinted with permission.

About the Author: Pat Garofalo is Economic Policy Editor for ThinkProgress.org at the Center for American Progress Action Fund. Pat’s work has also appeared in The Nation, U.S. News & World Report, The Guardian, the Washington Examiner, and In These Times. He has been a guest on MSNBC and Al-Jazeera television, as well as many radio shows. Pat graduated from Brandeis University, where he was the editor-in-chief of The Brandeis Hoot, Brandeis’ community newspaper, and worked for the International Center for Ethics, Justice, and Public Life.



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