Friday, July 6, 2007

Downward Pressure on U.S. Wages - Trade Not All to Blame

Grant Aldonas of CSIS, Matthew Slaughter of Dartmouth, and Robert Lawrence of Harvard recently wrote a report entitled "Succeeding in the Global Economy: A New Policy Agenda for the American Worker" sponsored by the Financial Services Forum. While the report finds that openness and globalization has added more than one trillion dollars annually to U.S. GDP, the debate has been too narrow, unfairly blaming trade for workers' woes. Here is an excerpt:

Since 2000 U.S. corporate profi ts have nearly doubled, from $817.9 billion in 2000 to $1.62 trillion in 2006. This rise has not been concentrated in one particular sector, but rather has been enjoyed quite widely across many industries. As a share of total national income, these corporate profits are today near 60-year highs at about 14 percent. The concentration of equity ownership in America means that higher corporate profitability may have contributed to the just discussed skewness of total-income growth.

To summarize: in recent years the large majority of American workers has seen poor income growth. Indeed, 96.6 percent of Americans are in educational groups whose mean total money earnings have been falling, not rising, since 2000. Only a small share of workers at the very high end has enjoyed strong growth in incomes. The strong U.S. productivity growth of the past several years has not been reflected in wage and salary earnings, and instead has accrued largely to the earnings of very high-end Americans and to corporate profits.

Read the full report here.

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