Corporate profits have soared while wages plummet – a story in two graphs

The rich are getting richer BECAUSE the poor are getting poorer

As we munch popcorn and watch the Republicans in their death match with President Obama over the fiscal speed bump and whether or not our economy will tumble to the ground if we raise taxes on the super-rich by 3.9%, a big part of the rhetoric we hear from the GOP is that this is a tax on business owners. Besides the fact that this is largely untrue and that in the small percentage of businesses affected, it only raises taxes on their income OVER $250,000 year, the fact is that our country’s economy is largely driven by large corporations and the contribution to Gross Domestic Product (GDP) by small businesses is shrinking.

Big businesses, as it turns out, are doing just fine. Workers’ wages, on the other hand? Not so much.

Have a look at this graph. It’s a version of one put up by Think Progress that compares “Corporate Profits After Tax” (CP) with “Compensation of Employees: Wages & Salary Accruals” (WASCUR) as a percentage of GDP:

What you notice is that, historically, corporate profits tend to dive during a recession while wages actually go up a bit, because they don’t drop as fast as the GDP. But starting with the Bush administration, things started to go pretty haywire. Corporate profits began soaring and, instead of tracking them as they typically did over the long-term, wages started on a downward plunge that has no sign of ending. Even the Great Recession was just a temporary setback and their profits continued their steep ascent, picking right back up where they left off once the recession ended.

Here’s another way to look at it (this one isn’t in the Think Progress piece — I used the nifty tool at the Federal Reserve site to create it myself.) This graph shows corporate profits over wages:

That’s pretty striking. The ratio of profits to wages is also going through the roof. In other words, corporations are earning more and more while paying less and less. While the ratio of a small business payroll to the business’s overall profitability likely didn’t change much, the big corporations were seeing shrinking payroll costs while their profits skyrocketed.

So, the next time you hear some conservative complaining that corporations are being bled dry by greedy union workers (or ANY workers, for that matter) looking for higher pay, tell them it’s malarkey (to borrow a phrase from Vice President Biden.) Because it is and they are lying to you.

And when you hear the Republicans complaining that our economy is struggling because we’re taxing the wealthy too much, give them the same answer.

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