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Rising profits fail to float all paychecks

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What happens when corporate profits boom?

The sad fact is that somebody pays for that and, in recent years, it's been the workers who hold jobs.

Maybe this isn't news to many, but it bears repeating because it is a very important lesson in capitalism.

In 2006, corporate profits reached their highest point in 40 years. Those earnings might have been tempered in recent months, but they are still at lofty levels.



Information from the U.S. Department of Commerce reports that the share of national income going to wages and salaries in 2006 was the lowest on record.

If this is not a recipe for an economic shake-up, it would be hard to find one.

Another report from the Economic Policy Institute, a Washington think tank, finds that the productivity of U.S. companies has risen nearly 20% over the past six years.

At the same time, middle-income workers have seen their wages rise just 3% after adjustment for inflation. Meanwhile, the 5% of workers on the highest end of the pay scale have seen their salaries climb three times as fast over the same period.

"The productivity gains of the 2000s tell us that the American work force has been working harder and smarter," said Jared Bernstein of EPI. "The problem is that their contribution to the growing economy simply isn't showing up in their paychecks."

Siphoning income from the middle class is not a sound practice under our economic model. A healthy and prospering middle class is a major contributing factor to the economic and political stability of the United States.

But if companies - and government policies - continue to find ways to steer profits away from workers and into the hands of business shareholders, our economic model will weaken, and perhaps eventually crack.

For a 20-year period, American businesses have been restructuring and redesigning themselves to meet the demands of an evolving global economy. Much of this restructuring has been healthy, but some of it has been opportunistic. When you start pulling money out of the pockets of workers and putting into corporate coffers, you are flirting with danger. Workers may bend, but it's unlikely they allow themselves to be whipped.

They will fight back. We already see it in corporations where women don't think they can climb to the top levels of management. Many of those women have abandoned big corporations to open their own companies.

Other signs might be a renewed interest in employee unions - which is already happening at the low end of the wage scale - and a general malaise in the work force that results in slumping productivity.

Allowing workers to share in the gains they help create by increasing productivity is a sound and time-tested business practice.

Creating an imbalance in this equation is not so sound and not in the best long-term interests of businesses or their employees.
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 gains  workers  lessons  salary  United States  profits  pay scale  Americans


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