Wages Relative To Profits Drop To All Time Low

Tyler Durden's picture


Getting paid miserable wages? Don't fret - just buy the stock of your (hopefully public) employer, and hope and pray that this time is different, and that light at the end of the tunnel is the not the next latest and greatest (and likely last) stock market collapse, in the ultimate trade off of current pay for capital gains: 19 quarters in and Labor Compensation is flat with where it was when the Great Financial Crisis began but, more crucially, employee compensation is at its lowest on record relative to corporate profits.



As we previously noted,

For those curious what the reason for records corporate profits is (or rather was: we have now finally turned the cycle and Y/Y profit growth is, for the first time since 2009, finally negative), the chart below explains it all.


It also explains why 401(k) plans are now redundant: anyone who wishes to keep up with the growth rate of their employer has no choice but to buy their stock, and generate returns for all shareholders. Because corporations, people or not, now have all the leverage.

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Wed, 12/04/2013 - 20:54 | 4215856 Colonel Klink
Colonel Klink's picture

Fuck'm all sideways with a chainsaw.

Wed, 12/04/2013 - 21:14 | 4215918 Central Bankster
Central Bankster's picture

*Rusty chainsaw.


fixed it for ya.

Wed, 12/04/2013 - 21:47 | 4216020 Colonel Klink
Colonel Klink's picture

Thanks!  Forgot that part.

Wed, 12/04/2013 - 22:33 | 4216161 Occams_Chainsaw
Occams_Chainsaw's picture

Did somone say chainsaw?

Thu, 12/05/2013 - 00:06 | 4216452 Colonel Klink
Colonel Klink's picture

I don't think you want this job.

Thu, 12/05/2013 - 10:50 | 4217453 fallout11
fallout11's picture

Serfdom at its finest!

Wed, 12/04/2013 - 20:58 | 4215861 Stuck on Zero
Stuck on Zero's picture

Does that "employee compensation" include pay for the top managers?  If so, that graph looks even worse.


Thu, 12/05/2013 - 02:07 | 4216713 Glasnost
Glasnost's picture

Also wondering Tyler is chart in nominal or real terms?

Wed, 12/04/2013 - 20:59 | 4215868 Tippoo Sultan
Tippoo Sultan's picture

Naturally, as most of the profits are derived from the sale of items produced by cheap PRC labor.

Wed, 12/04/2013 - 20:59 | 4215873 Sardonicus
Sardonicus's picture

ADP was hacked.  Maybe that is why their report was so great today.

See end of article  http://money.cnn.com/2013/12/04/technology/security/passwords-stolen/

Wed, 12/04/2013 - 21:02 | 4215880 The Alarmist
The Alarmist's picture

To paraphrase Beezos Maximus, Profits might be for pussies, but wages should never factor into the bottom line.

Wed, 12/04/2013 - 21:11 | 4215908 Central Bankster
Central Bankster's picture

I mean it's funny how the farther you get from capitalism and the closer you get to central planning, the worse it all gets.  Good job Bernanke, hope you're remembered like the other great socialist/fascist leaders!  My favorite part is when the socialists/fascists try to call this current environment capitalism, so that they can explain how their policies of socialism and fascism aren't destroying the world for the average person.

Wed, 12/04/2013 - 21:25 | 4215952 yrbmegr
yrbmegr's picture

Capital enjoys a tax advantage in this country relative to labor.  It is no mystery that people want to use capital rather than labor to make profits.  It is no mystery that wages keep getting compressed, since there is a 3-5% disadvantage at the margin for labor.  We can reverse this trend if we would just treat capital gains as ordinary income, just like wages.  Remove the tax advantage and the economy will rectify itself over time.

Thu, 12/05/2013 - 00:24 | 4216514 antisoshal
antisoshal's picture

This. Only coherant comment here yet, but since it doesn't blame Obama or propose absolute de-regulation as a solution, no one will learn a thing from it.

Thu, 12/05/2013 - 00:50 | 4216597 Central Bankster
Central Bankster's picture

Sure. Coherent, but erring in the supposition that taxes alone are somehow the solution.  Increase taxes on capital gains as suggested, and the gov will continue to expand as a % of GDP regardless.  Reduce both taxes, reduce the size of government AND treat labor/capital the same, then we are going somewhere.

Thu, 12/05/2013 - 01:04 | 4216641 atomp
atomp's picture

How about dropping the income tax to the level of long term cap gains tax?

Come to think of it, WTF are we taxed on our labor at all?

Thu, 12/05/2013 - 10:57 | 4217475 fallout11
fallout11's picture

Because Robber Barons wanted it so. We were not, prior to 1914.

Thu, 12/05/2013 - 09:15 | 4217176 yrbmegr
yrbmegr's picture

I think federal revenues, on the whole, are about right at 19% of GDP.  Spending, at 20.5% of GDP is still too high.  We can fix the imbalance in a revenue neutral way.  It is the imbalance that is distorting the economy.

Thu, 12/05/2013 - 02:49 | 4216750 ebworthen
ebworthen's picture

Without the rule of law, sound money, earning % above inflation on savings, and respect for the labor of the individual and the value of a responsible household - taxes and capital lose all meaning.

Thu, 12/05/2013 - 09:18 | 4217184 yrbmegr
yrbmegr's picture

I agree that laws must be enforced.  I think the rest of the items on your list would fall into line if laws were enforced.  Unfortunately, that takes money, which comes from the people against whom the laws would be enforced.  They see their interests best served in minimizing capability of government to govern them.

Tue, 12/10/2013 - 13:07 | 4232871 IREN Colorado
IREN Colorado's picture

Thank you for your comment, however, the way to correct this is to lower the tax rate on wages, not raise the tax rate on Capital. Raising the tax rate on Capital will simply further depress economic activity or send more of it elsewhere. 

Why anybody thinks raising taxes on anything will improve economic activity is a mystery.

Wed, 12/04/2013 - 21:46 | 4216017 starman
starman's picture

I grew up in socialism moved to the US 30 years ago and now socialism found me ! I'm getting my family foreign passports as we speak and off I go where I can hide from socialism for another 30 years!
Have fun suckers with this Naczi socio fucked up government!

Wed, 12/04/2013 - 21:52 | 4216044 Lordflin
Lordflin's picture

Ahhh... hitching a ride on that Chinese moon rocket are you? Besides... we are fascist here, socialism is just a ruse. You should know that what with your past history and experience...

Wed, 12/04/2013 - 23:07 | 4216281 alien-IQ
alien-IQ's picture

And what non-socialist paradise do you plan to escape to?

Thu, 12/05/2013 - 00:56 | 4216608 Central Bankster
Central Bankster's picture

Hah so true.  Please don't tell me you are now going to suggest that anyone who likes free market capitalism and no government move to Somalia.  That is the usual troll follow-up. ;)

Thu, 12/05/2013 - 12:02 | 4217485 fallout11
fallout11's picture

But as government inevitably interferes with free market capitalism, or becomes hostage to special interests within it (bankers, cartels, corporations, e.g. lax immigration rules created at the behest of numerous corporations giving D.C. golden showers exacerbating the current wage situation), where else in the world will you find it?

Thu, 12/05/2013 - 02:50 | 4216748 ebworthen
ebworthen's picture

Chatted about 30 years ago with an old Russian guy who escaped to America.  He said:

"What the hell is wrong with you people?  I come here for freedom and capitalism and you let the immigrants stream across the border and work like slaves.  You pay the Blacks to not work and have children out of marriage.  You allow corruption in your politicians and corporations to make the rules!  What happened!?!?  I thought I was coming to a country where my money was safe, my labor was respected, and corruption was punished.  What!?!?  Do you want to be like the U.S.S.R.!?!?"

Thu, 12/05/2013 - 10:35 | 4217408 Toolshed
Toolshed's picture

So what planet are you moving to? I fully understand your sentiment, but, realisticly, there is no safe place left on Earth.

Wed, 12/04/2013 - 21:51 | 4216034 Lordflin
Lordflin's picture

Well, Obama today decried the desparity between rich and poor. I know it made my heart go pitter-patter....

Wed, 12/04/2013 - 22:03 | 4216078 starman
starman's picture

Lordfin. Obama is a psychopath and I'm sure you know it, as for the US
It's done the glory days of America was in 1950! China's glory days are now .

Thu, 12/05/2013 - 00:14 | 4216484 tarsubil
tarsubil's picture

China? Good luck with that.

Thu, 12/05/2013 - 02:43 | 4216745 ebworthen
ebworthen's picture

Yeah, he cares so much.

Just like the mandarins on the right.

All creatures of the same game; power, money, and a juicy benefits and retirement package.

Why people can't see that this country is run by the banks/insurers/corporations with the politicians as their stooges to game the populace I don't know.

I guess it is easier to believe in something that isn't true than to face reality.

Thu, 12/05/2013 - 10:32 | 4217404 Toolshed
Toolshed's picture

Well said ebworthen. I think the root of the problem is human nature. We just seem to be instinctively compelled to separate ourselves into groups of "like minded" people and then proceed to loudly proclaim that our group has all the answers and all dissenters need to be "re-educated" and/or eliminated. Sadly, there appears to be no cure for this affliction. Well, other than death anyway.

Wed, 12/04/2013 - 22:40 | 4216184 ejhickey
ejhickey's picture

i propose making the minimum wage the dollar equivalent of one ounce of silver

Thu, 12/05/2013 - 00:20 | 4216494 WTF_247
WTF_247's picture

There is only one answer that will solve this.

Form a national Workers Union.  It covers any worker in any job in any state that is not already in a union.

This allows white collar workers to go on strike also - anyone that belongs to a Union has automatic benefits and protections.  Its not just the bottom wage earners that get screwed.  Those that have significant experience and education are getting hammered also.  One can say - well they are far better off anyway - but when you go to school for 10 extra years and then work for another 10-15 at high level jobs you should command a decent salary.  Instead the opposite has happened - globalization has outsourced your job to someone from India or Pakistan for 1/5 the cost.

Form a national union of American workers.  That will provide for widespread strikes in many industries without fear of firing or reprisal from the employer.  The employers can choose to outsource further but bottom line they have to have someone selling at some point.  Take that away from them and they cry uncle.

Thu, 12/05/2013 - 10:24 | 4217378 Toolshed
Toolshed's picture

So what you are saying is we should all become French. I am pretty sure the unintended consequences would be quite dire. Kinda like in France right now.

Thu, 12/05/2013 - 00:23 | 4216508 antisoshal
antisoshal's picture

I love how half the comments here blame socialism and central planning and half blame corporatism and tax laws that benefit corporate structure rather than labor. 

Thu, 12/05/2013 - 00:58 | 4216615 Central Bankster
Central Bankster's picture

I love how some people think taxation alone is the issue.

Thu, 12/05/2013 - 10:04 | 4217298 d edwards
d edwards's picture

Socialism is the real problem-


the US hasn't practiced REAL free market capitalism for several decades.

Thu, 12/05/2013 - 00:49 | 4216594 Bobportlandor
Bobportlandor's picture
Union votes 'No' -- Atlantic Express says it will close by the end of the year



Without this labor contract, we have no choice left but to proceed with the sale of the all of the company's assets and contracts,"

5500 layed off Union dimwits out of work after dec 31, guess news in Detroit never made it that far east yet.

Thu, 12/05/2013 - 01:10 | 4216654 rosiescenario
rosiescenario's picture

Surprised that no one here has pointed out that our lax immigration rules (created at the behest of numerous corporations giving D.C. golden showers) is primarily to blame for the current wage situation.


Just our typical case of special interest groups served first and the general public being screwed.

Thu, 12/05/2013 - 10:22 | 4217370 Toolshed
Toolshed's picture

The reason no one here has pointed out that our lax immigration rules are the primary cause of the current situation is because that is simply not the case. Our lax immigration rules are a minor contributing factor at best. The primary cause is unalduterated greed. Period. If the government kept all the illegal immigrants out of the country we would, in short order, experience a food shortage resulting in much higher food prices. This has been demonstrated quite clearly in the past few years.

Thu, 12/05/2013 - 02:37 | 4216739 ebworthen
ebworthen's picture

Big fucking surprise.

When .gov tells the corporate machine they get a pass for a year while telling the citizen to bend over and pay up or you will be penalized by the I.R.S. you know the jig is up.

This country is now "Of the corporations, by the corporations, for the corporations."

Yes, it is that simple. 

It isn't a left or right debate because both sides have colluded to "make it so" (including the Supine Court which has granted corporations the title of "individual" and that there is no such thing as property rights - just reference KELO vs. City of New London, dear peasant).

So...of course the profit of corporations is up while wages are down...THAT IS THE PLAN.

Who the fuck do you think bribes your CONgress Critters religiously to buy their votes?

The Corporatocracy!  The cabal of bankers/financiers/insurers/corporations that OWN us!

Forward Kleptoligarchy!  May it die a slow death by a thousand knives for the sake of my progeny!

Thu, 12/05/2013 - 03:06 | 4216758 dunce
dunce's picture

Public sector pay may exceed profit growth. They lump private and public to get their number

Thu, 12/05/2013 - 12:52 | 4217850 Mario55
Mario55's picture

Is it possible that the divergence between the evolution of profits and wages is simply due to the fact that US corporations are more actively producing and selling overseas, thereby generating profits but no increase in US wages?

It is a fact that a corporation wishes to sell goods to Chinese people, in many cases it will have to set up a local joint-venture.

If that's the case, is it bad?

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