Amazon. Costco. Walmart. All are lean, mean, cost-cutting machines. But given that their customer-level jobs don’t pay so well, and they’ve eviscerated the middle-management ranks, are they at least partly responsible for workers receiving a smaller share of the GDP?
From the NYT (“‘Superstar Firms’ May Have Shrunk Workers’ Share of Income“):
For much of the last century it seemed that the slice of the total economic pie going to workers was — like the speed of light — constant. No matter what the economy’s makeup, labor could collectively depend on taking home roughly two-thirds of the country’s total output as compensation for its efforts. Workers’ unchanging share, the economist John Maynard Keynes declared in 1939, was “one of the most surprising, yet best-established, facts in the whole range of economic statistics.”
But in recent decades, that steady share — which includes everything from the chief executive’s bonuses and stock options to the parking-lot attendant’s minimum wage and tips — started to flutter. In the 2000s, it slipped significantly. Although the numbers have inched up in the last couple of years, labor’s portion has not risen above 59 percent since before the recession.
The decline has coincided with a slowdown in overall growth as well as a stark leap in inequality. “Labor is getting a shrinking slice of a pie that’s not growing very much,” David Autor, an economist at M.I.T., said. It is a development that is upending political establishments and economic policies in the United States and abroad.
The reason for workers’ shrinking portion of the economy’s rewards is puzzling.
Some economists argue that technological advancements are to blame as employers have replaced workers with machines. Others point to trade powered by cheap foreign labor, a view championed by President Trump that particularly resonated among voters.
Alternate culprits include tax policies that treat investment income more favorably than wages; flagging skills and education that have rendered workers less productive or unsuited to an information- and service-based economy; or a weakening of labor unions that has chipped away at workers’ bargaining power and protections.
Over the last 15 years, for example, labor productivity has grown faster than wages, a sign that workers are not being adequately compensated for their contributions. And some industries have fared worse than others. Slices of the pie going to mining and manufacturing narrowed the most, while service workers (including professional and business services) had the biggest gains.
Now, a new study points to another story line: ‘Superstar firms.’
From manufacturing to retailing, giant companies have managed to gobble up a larger and larger share of the market.
While such concentration has resulted in enormous profits for investors and owners of behemoths like Facebook, Google and Amazon, this type of “winner take most” competition may not be so good for workers as a whole. Over the last 30 years, their share of the total income kitty has been eroding. And the industries where concentration is the greatest is where labor’s share has dropped the most, according to research that analyzed confidential financial data from hundreds of companies.
Read the whole thing. There is a graph that helps illustrate the trend.