
Why are US corporate profits so high? Because wages are so low - d4vlx
http://blogs.reuters.com/macroscope/2014/01/24/why-are-us-corporate-profits-so-high-because-wages-are-so-low/
======
bsamuels
So just off the bat reading the title, I was expecting numeric evidence for a
very numerically based claim.

The data the article provides does not support the author's claim, to say it
nicely. For one to claim there's an association between wages dropping and
corporate profit increasing, you'd need an area graph over time of corporate
expenditures with with worker wages and other common expenses listed. Neither
of the graphs included support his claim, as there's a multitude of other
variables that could explain their trends. The second claim the author makes
is that this is occurring specifically for US companies. There is no data at
all cited for this claim.

I wish people would at least "try" when publishing articles with a political
motive. All this article will do is reinforce the belief that wages need to
rise for people who already believe it.

~~~
zurn
Looks like it's just summarizing what the Chief Economist at Goldman Sachs
thinks. There is lots of other reporting about it on the news.

Do you have a theory on what political motive GS might be pushing? Promoting
worker wages with made up arguments and unfairly criticising corporate profits
doesn't seem to fit their agenda.

~~~
VLM
What is the macroeconomic effect of workers 401K stock investment plans? Stock
transactions. You get to skim a little off the top both at purchase and sale.
Back in the old days when more people were working, on average having higher
income, they'd skim more commissions.

There is an interesting secondary effect of small retail players having been
net purchasers of stock via retirement plans, which is to push the market up.
You can rely on the fed lowering interest rates to push the market up until
rates hit zero, you know, like now, then that stops. Hmm what happens to stock
prices when more baby boomers are selling than millennials are buying... Maybe
their only hope is to get as many people contributing to retirement funds as
possible to at least reduce the blow.

Stocks are fundamentally kinda like real estate in that sellers can stamp
their feet and pout and demand whatever rate of return they like, but in the
long run, the median sales price is going to be whatever the median dude can
afford, and "the market" doesn't care what the sellers "need" it only cares
what the buyers median income is, which has been falling for a couple decades
depending on who cooks your numbers.

In the long run, not just next quarter, GS badly needs a lot more workers
contributing to 401K and other retirement options. Maybe they're too heavily
leveraged up to survive not having more workers to transactionally skim off
of.

------
thrownaway2424
What's particularly disturbing is the sheer greed being shown in pursuit of
these profits. There was a recent article about an auto plant in Michigan that
went through near-bankruptcy but is now making a $2bn/year profit. The profit
was attributed in part to $50m/year in reduced wages that were extracted from
the union in exchange for not closing the plant. Those concessions represented
over one third of the wages but only 2.5% of the resulting profits. That's
just disgusting. They should have kept the wages steady and enjoyed their
more-than-sufficient 1.95bn/year in profits.

~~~
yummyfajitas
Business income is volatile. The business made a $2B profit in one particular
year, whereas in other years they made losses that nearly destroyed them.
Somehow I suspect when the business took losses, the employees did not return
their wages.

Unless you want employees to share the downside of business income volatility,
it's unreasonable to expect them to share the upside.

~~~
VexXtreme
> Unless you want employees to share the downside of business income
> volatility, it's unreasonable to expect them to share the upside.

This is an incredibly dishonest statement. Employees DO indeed share the
downside of business income volatility by being forced to take pay cuts when
their company is going through a rough patch. I see it all the time and I've
had it happen to me.

Why are we pretending this is not the case?

~~~
yummyfajitas
I'm confused. You signed on to be paid $X/month, you worked a month and were
paid $X. Later you renegotiated the contract to be paid $Y < X/month, you
worked a month and were paid $Y. If you want to work elsewhere for $X or $2X
or whatever, you can.

Downside risk: you signed on to be paid S shares/month or P% of profits. You
worked a month and the share price tanked. You already took the loss.

~~~
Adirael
Employees are negotiating from a vulnerable position when the options are
"take pay cut or good luck finding a new job".

~~~
pdonis
You left out an option: start your own business. What the Reuters article
tells me is that there is a large pool of available labor for new businesses
to use. Why aren't more people taking advantage of this opportunity?

~~~
unclebucknasty
Funny that you post that question on a forum full of people who know well from
first-hand experience how difficult it is to start a successful business.

~~~
pdonis
I didn't say it wasn't difficult. Of course if the choice is between having a
steady, reliable job and starting your own business, it's a lot easier to
choose the steady, reliable job. But the whole point of the article in Reuters
is that the job is _not_ steady and reliable any more; that changes the
relative risks involved.

Also, to the extent that it's hard to start a business because of government
regulation (which is a _large_ extent), the obvious response is to remove the
regulations that make it hard to start a business. That would mean more people
starting businesses, hence more new jobs available for other people who are
currently out of work. Funny how the Reuters article doesn't mention that.

~~~
unclebucknasty
> _the whole point of the article in Reuters is that the job is not steady and
> reliable any more_

That's circular reasoning where this thread is concerned. People are saying
here that corporations should be sharing the upside with employees. You are
saying that since they are not, people should start businesses. You're
changing the subject and giving the corporations a pass.

> _to the extent that it 's hard to start a business because of government
> regulation (which is a large extent), the obvious response is to remove the
> regulations that make it hard to start a business._

Sorry about the delay. Took me a while to wipe the vomit from keyboard.

Seriously, while these regulatory complaints are something that we tend to
hear from people with certain political affiliations, I challenge you to cite
references to actual regulations that are to any "large extent" preventing
actual small businesses from starting. In fact, the implication in the
Reuter's article is that businesses are doing just fine in the current
regulatory environment. They are more profitable than ever at the expense of
the worker.

And, I think the HN populace exemplifies the _actual_ difficulty in starting
_successful_ businesses. I doubt many here will cite regulations as a key
challenge. Instead, it's actual business problems, such as product
development, finding market-fit, competition, marketing, lack of capital,
inability to scale, etc.

~~~
unclebucknasty
Hmm. Downvoted, but no one actually refuted my assertions. Nice.

~~~
alpeb
>Sorry about the delay. Took me a while to wipe the vomit from keyboard

Not nice.

~~~
unclebucknasty
Ah. Style points. I get it.

------
mariano54
I had to comment on this due to the large amount of misinformation in this
thread.

Many people think that companies should be kind, and pay more than the market
wage for their workers. This is false and unreasonable. Companies try to
minimize their costs, including wages.

Now if in some industry, some company is making huge profit margins, and
paying low wages, what is the cause, and what is the solution? In economics,
profits go down until they reach 0 or close to 0. Why? because if there are
huge profit margins, more firms come in, to compete. Therefore in all
industries, profits go down to a lower level.

Now why doesn't this happen in practice? The answer is artificial barriers to
entry. Political agreements and regulations benefiting the big companies. So
what is needed here is an easier path for new companies (Which are people
after all). This will always ensure that profit margins stay low, and wages
approach the true market rate.

The solution is not donation. Why would a company pay 9 dollars to a worker
who is willing to work for 8? Why aren't YOU donating money to poor people in
Africa? The answer is not minimum wage either. This distorts markets. If you
want to alleviate poverty, in a more economically reasonable way, do it though
universal income.

~~~
erichocean
Your intuition is correct, but unfortunately, it doesn't actually work that
way, because on a per-employee basis, big business is ~4x more efficient.

That is, for every $1 in revenue an SMB brings in, big business brings in $4.
(These numbers are averages, but the basic relationship holds across
industries.)

I personally do not see how SMBs can compete when they are paying 4x more for
labor.

The reason big business is so efficient is IT investment, and the problem with
IT investment is that you need to be big in order to really take advantage of
it. The amount of improvement SMBs get for a proportional amount of investment
is low. You have to spend a lot to get anything, really, and SMBs just can't
afford that.

So, to recap: big business profits stay high because SMBs actually can't force
prices downward, due to the huge imbalance in labor costs between SMBs and big
business.

If we could get the same IT advantage to SMBs at a cost that is proportional
to their revenue, then the dynamic you expect to be occurring would, in fact,
happen.

~~~
WalterBright
Consider your statement in the light of looking at the 10 largest corporations
in America on a decade by decade basis. Go back a few decades, and I bet you
won't even recognize the names.

Again and again, small companies have displaced can't-fail big ones.

~~~
afterburner
Here, go nuts, looks like you're way off:

[http://money.cnn.com/magazines/fortune/fortune500_archive/fu...](http://money.cnn.com/magazines/fortune/fortune500_archive/full/2000/)

[http://money.cnn.com/magazines/fortune/fortune500_archive/fu...](http://money.cnn.com/magazines/fortune/fortune500_archive/full/1990/)

[http://money.cnn.com/magazines/fortune/fortune500_archive/fu...](http://money.cnn.com/magazines/fortune/fortune500_archive/full/1980/)

[http://money.cnn.com/magazines/fortune/fortune500_archive/fu...](http://money.cnn.com/magazines/fortune/fortune500_archive/full/1970/)

[http://money.cnn.com/magazines/fortune/fortune500_archive/fu...](http://money.cnn.com/magazines/fortune/fortune500_archive/full/1960/)

~~~
WalterBright
Take a look at this page:

[http://en.wikipedia.org/wiki/Historical_components_of_the_Do...](http://en.wikipedia.org/wiki/Historical_components_of_the_Dow_Jones_Industrial_Average)

~~~
afterburner
It's interesting, although the Dow Jones index is sort of arbitrary in its
choices; it's certainly not the "largest corporations" as you stated, although
of course some of the largest will end up in it.

In fact, I'm not really able to find what it is that actually determines what
companies are in the Dow Jones Index. If you know or find something I'm
curious.

~~~
WalterBright
I've seen in print listings of the largest by market cap for each decade, but
after considerable time on google was unable to find it.

The DJ is a reasonable proxy of it, though, as it's meant to be representative
of the economy, and so by its nature will mean the biggest ones.

------
PythonicAlpha
In all industry, the trend goes one way: The wages of working people
(including white-collar, I hope, that is the right word) have to go down, and
the earnings from investments (pure money makes money business) have to climb.

There are only very few exceptions: One are lawyers, as mentioned in an other
thread, and the other are people that work in the investment business
(investment bankers, traders, ...). The reason for the second exception is
obvious: their work is needed to make even more money from the money and every
trick is played, to have the smartest, best guys getting the job done ... and
get it done better and better.

Problem is: The whole thing breaks our society. Middle classes are already
melting massively in many countries. The possessions of the worlds are
concentrating in the hands of very few people more and more. Those people make
our laws! The other people become poorer, even in the situation that the
overall worlds possessions expand massively. The countries are already so much
in dept, that many of them can not pay even the interest. Even the US is so
much in dept, that there seems to be no possibility to get ever rid of it.

Nobody seems to realize, that while we are talking, investment companies are
roaming the world for land, for houses, for companies to buy them, exploit
them and throw it away when not needed (and not useful) any more. The wealth
of the world gets accumulated in the hand of investment companies and the
super-rich.

By rising the value of pure money investments, the value of human labor (to a
more and more extend even high-paid and high-value labor) is degrading.

~~~
eru
> In all industry, the trend goes one way: [...]

If that was true, wouldn't we have had to have a mythical past of zero
earnings from investments and 100% of revenue going to labour?

~~~
MarkPNeyer
that's kind of how it was. there were no earnings from investments when there
was no investment; when everybody was working it was workers who took all of
the gains because there was nobody else involved.

~~~
eru
Yes, but grand parent said it's all going in the same direction. Ie 18th
century was better than 19th century was better than 20th century.

~~~
atmosx
???

In what way was the 18th century better than the 19th????

~~~
eru
I agree with you, that the 20th century was better than the 19th and the 19th
was better than the 18th. Thus I disagree with PythonicAlpha, who said

> In all industry, the trend goes one way: The wages of working people
> (including white-collar, I hope, that is the right word) have to go down,
> and the earnings from investments (pure money makes money business) have to
> climb."

I guess my argument by contradiction relied too much on the context higher up
in the thread.

------
InclinedPlane
Oh, so NOW correlation is causation. Great, I'll go correct my notes so I
don't forget, it's always so confusing.

There's one thing lacking here, and that is, of course, a causal link. It
would be nice if they went down the line and compared employee wages relative
to corporate profits on a per company basis. It might be that there are
different things at play here.

There's a lot of data missing from this incredibly shallow analysis. Not that
I dispute the results, but the argument isn't well backed by the data.

Edit: as a side note I think a lot of problems with employment in the
developed world today are due to extremely outdated labor laws that prove to
be more damaging than helpful. The expectation of the entire system is that
workers will be locked into employment at a particular company for life, will
work 40hr/wk on average week in week out, and will rise in pay incrementally
over their career. Those assumptions result in worker benefits being tied to
employers. They're why the government can get away with hiding half the tax
rate of the payroll tax from workers behind the "employer contribution".
They're partly why savings rates have fallen so badly over the past few
decades. And so on. A lot of which is ultimately to the detriment of the
individual worker. If workers were more independent and more mobile, able to
self-employ more easily, and so on then they'd tend to have much higher wages
on average, I'd wager. The current system doesn't reward independence, it
punishes it, but independence is precisely how workers gain an upper hand once
they've built up a considerable amount of experience.

~~~
nabla9
When you cut the pie into different size pieces and one gets more than before
and one gets less, causality is trivial.

~~~
InclinedPlane
Classic zero sum game fallacy.

------
thrush
I don't agree with this article (wages may be low, but that's _exactly_ why
corporate profits are so high). I think the internet and new technology has
helped companies expand their profits at incredibly low cost. Consider the
recent article about Stripe joining The Billion Dollar Club [1]. It's an
absurd fact that such a small and new company can become so successful in so
little time. If that is the effect that tech is having on small companies,
imagine what effect it is having on large companies. The internet is like
steroids for business.

[1]
[http://online.wsj.com/news/articles/SB1000142405270230463220...](http://online.wsj.com/news/articles/SB10001424052702304632204579337043662898228?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304632204579337043662898228.html)

------
ergoproxy
Quite simply, "productivity" is the sum of all real goods and services
produced in the economy, while "wages" are simply the share of that produce
brought home by the workers who produce it. The difference is profit. If
productivity increases (as it has since the 1950s) and wages flatline (as they
have since the 1970s), then the result must be rising profits. You can see
this graphed in the brief "The wedges between productivity and median
compensation growth" at [http://www.epi.org/publication/ib330-productivity-vs-
compens...](http://www.epi.org/publication/ib330-productivity-vs-
compensation/)

The question left unanswered in this article is why are wages in the US
falling relative to productivity?

Since wages are the "price" of labor, and prices are set by supply-and-demand,
falling wages imply either (1) an increasing labor supply or (2) a shrinking
demand for labor (or both). So here are some specific reasons for stagnating
US wages:

INCREASING LABOR SUPPLY \- Slave labor, prison labor and child labor in
countries like China. \- Immigration from Latin America after NAFTA. \-
Liberated women entering the paid US labor force starting in the 70s.

DECREASING DEMAND FOR LABOR \- New labor-saving technology, computers and
robots that work faster, better and cheaper than humans. \- Financialization:
Investors can make more money from asset bubbles in housing, bonds, and
dollars than they can from labor. \-- ZIRP: With real interest rates heading
to zero (or less), why should I continue to pay high interest on the money I
borrowed a decade ago to build this US factory? Liquidate the factory, fire
the workers, and relocate somewhere cheaper; or better: simply use the money
to buy bonds and bet on falling interest rates. \-- High housing prices: An
employer needs to pay his workers subsistence wages, which means enough to buy
a place to live, but with housing prices so high, this is impossible. Better
to bet on the housing bubble than buy labor.

~~~
eru
> INCREASING LABOR SUPPLY - Slave labor, prison labor and child labor in
> countries like China.

China had enough farmers moving into industry. Slave, prison and child labour
may happen, but they are not particularly efficient and so don't make much of
a dent in overall figures.

~~~
ergoproxy
For there to be equilibrium between supply and demand, several conditions must
be met: perfect competition; perfect information; no economies of scale; no
barriers to entry; no negative externalities; and no cheating.

Things like slave labor, prison labor and child labor are cheating. There's a
lot of evidence China cheats the free market in these ways, and that's why I
singled them out.

For example, "Apple has cut ties with one Chinese supplier that was found to
have 74 workers under the age of 16." Source: globalpost.com (January 26,
2013)
[http://www.globalpost.com/dispatch/news/business/technology/...](http://www.globalpost.com/dispatch/news/business/technology/130126/apple-
uncovers-child-labor-drops-supplier)

Foxconn's factories in China installed suicide nets to catch workers jumping
off the roof, which sure makes them look like forced labor camps. Picture
here:
[http://news.cnet.com/2300-13579_3-10013733-14.html](http://news.cnet.com/2300-13579_3-10013733-14.html)

~~~
eru
If being cheated means being able to buy cheaper consumer goods, come by and
cheat me any time you like.

Just because a market is not perfect, doesn't mean it provides no benefit.

~~~
ergoproxy
So its OK if Chinese workers are cheated, as long as you get a bargain?

The ultimate impact of foreign slave labor on US free labor boils down to
this: Is free labor superiority per hour more than counterbalanced by labor
that can be flogged, worked to death, and quickly replaced? Is there slave
labor with which no free labor can compete? If your answer is no, then go on
buying cheap goods produced by slave labor, because it will have no
consequences for the US standard of living. But if the real answer is yes,
then buying slave-made goods paves the road to slavery for America.

~~~
eru
Frankly, my dear, I don't give a damn about the US standard of living. If
anything, the more numerous Chinese deserve around 5 times more caring.

(And for the record, the Chinese are not making inroads because of slave
labour. They make inroads in spite of some slave labour.)

~~~
ergoproxy
"deserve": Are you arguing economics or social justice?

I'd like to see everyone's standard of living go up. But when equilibrium
doesn't exist because of cheating, Pareto optimality no longer obtains, and
some people profit at the direct expense of others. Slavery is a prime
example. It shouldn't exist at all.

I'd recommend anyone reading this thread take a look at "Apple (and America’s)
Chinese Slave Labor Problem" by Karl Denninger at
[http://www.financialsense.com/contributors/karl-
denninger/20...](http://www.financialsense.com/contributors/karl-
denninger/2012/01/23/apple-and-america-chinese-slave-labor-problem)

~~~
eru
> "deserve": Are you arguing economics or social justice?

Social justice. I am not from the US of A after all (and even if I was, I
don't see the point about worrying about some accident of geography /
history).

------
hudibras
Before the inevitable globalization, free trade, and we-should-get-rid of-the-
minimum-wage arguments erupt, please keep in mind that the article is talking
about, and the second chart (the wage one) is showing, average annual changes
by percentage. So this applies to ALL jobs (including yours, Dear Reader) not
just the usual suspects of manufacturing and low-skill jobs.

So ask yourself: how much has my pay gone up in the past year? How about in
the last 5 years?

~~~
dnautics
but it's gone up right? Why hasn't that been enough? Last year as a
(relatively poor) postdoc, I made 40k/year. But if my grandfather had made 40k
at age 31 he'd have been a happy camper.

remember, macroeconomics says that because of the phillips curve, inflation is
a way to goose employment (because of sticky wages) in other words, the
purpose of the policy of inflation is to screw laborers out of the real value
of their labor.

~~~
tostitos1979
I don't understand your argument. 40K in today's purchasing power buys you
1/20 of a house in San Jose. It is about real wages not nominal wages. And I
think for many people in the middle class, we might be earning less than our
parents did in their 20s and 30s (in real wage terms).

Addendum: what's more ... if someone in your pervious generation had a PhD,
they likely would be able to get tenured jobs at Universities. That is a bit
harder these days.

~~~
dnautics
that's exactly my argument. These are all consequences of policies, not
economics.... And, while research science may be a odd case, I am definitely
making less than my dad did at my age.

------
nickff
Could the correlation be due to "the dreaded third thing"?[1] (a common cause)

Perhaps large corporations are now deriving a large portion of their income
and profits from government-derived sources, and relationships between
executives and government officials or regulators; if this is true, there is
no reason to give raises to employees, as the low-level workers are relatively
unimportant.

[1][http://www.econtalk.org/archives/2013/10/oster_on_pregna.htm...](http://www.econtalk.org/archives/2013/10/oster_on_pregna.html)

------
allochthon
_Companies have been unable to raise prices much because of the economic
recovery has been fragile._

Perhaps related to a lack of disposable income and consumer confidence?

The concentration of wealth is starting to become genuinely worrisome from a
societal perspective. There must be some sort of tipping point where real life
crosses into dystopia, but I don't know quite what it would look like and what
the longterm implications would be. The US political process is already
buckling under the unseemly influence of contributions from a small number of
donors. At what point are you awoken from your sleep and then realize that
things really are going to be bad? What does "bad" look like, beyond what
we're already seeing, such as long-time residents being priced out of San
Francisco?

------
jokoon
If this goes on too long, it might get bad. Manhattan will become a closed
island where you won't be able to go onto until you live there because there
will be too many protesting attempts. Easy to do with all those bridges.

People will start to assault people in suits. You will either swallow the blue
pill and join a select club of salesmen, or die with your dreams.

I don't like to have those ideas and I hope they're stupid, but right now I
would not be surprised to see terrorist groups that try to attack individuals
who have some sort of a public, very long shadow, like Dick Cheney or the Koch
Brothers. Any important kind of people who blatlanty shows their disrespect
for poor people in general and their unhidden narrow minded view of the world.

Right now I'm not suprised to see so many conspiration theories, people are
pissed and they want to burn witches, and I'm sure you can find some. It's
bad, but I don't see any political future that is trying to make things a
little better. At least during the cold war, the US had to be better than the
communists and prove how markets are liberating. Now it just seems communism
had good ideas and that capitalism is going to slowly fail.

------
yummyfajitas
I've graphed employee compensation and business profits on the same graph. Not
seeing much correlation. Compensation mostly goes up. Business profits go up
and down.

[http://research.stlouisfed.org/fredgraph.png?g=rnM](http://research.stlouisfed.org/fredgraph.png?g=rnM)

I don't get it.

~~~
digitalengineer
Could it be pensions? After bankruptcy they can dump those expensive plans.
(Like the city of Detroid and other states already did).

~~~
yummyfajitas
Nowadays you are only allowed to underfund government pensions (USPS
excluded). Private sector pensions must be fully funded - i.e., if an employee
has vested a pension with an actuarial value of $20k, the company must put
$20k into a separate fund to pay for it.

(Some old pension plans are grandfathered to escape this, however.)

~~~
malka
Except that $20K today may not have the same value as $20K in 30 years.

~~~
erichocean
So, lobby the government to enact a law that adds X newly-printed dollars to
each pension each year based on the government's own inflation calculation.
Then the value of the pension each year would stay the same, and even better,
the pension would not need to invest in risky assets. (If you want, mandate
that the pension invest in T-bills, and then cover the difference.)

This kind of approach involves no new taxes, and there's absolutely no reason
to "borrow" the money from the Federal Reserve either, or future generations,
or the general public via T-bills. Literally, you just need to change the
amount of money each pension "has" on the books. The banks are regulated, and
they'd be forced to except the updated balances by law.

------
ozgung
This reminds me of the Marx's theory of Surplus Value, which implies that
"profit" equals the "stolen" labor.

[http://en.wikipedia.org/wiki/Surplus_value](http://en.wikipedia.org/wiki/Surplus_value)

~~~
eli_gottlieb
This _resembles_ Marx's theory of Surplus Value. This is _evidence for_ Marx's
theory of Surplus Value.

~~~
marcosdumay
I still doubt the theory, but yes, it's valid evidence.

Just don't jump onver a conclusion too fast, because it's still evidence for
substitution of production factors (that leads to competition between them),
an idea almost completely opost to the labor theory of value. (Did I already
tell you that I hate economics?)

------
nabla9
Wage's share of GDP have been in decline in all OECD countries since mid 70's.
U.S. is just leading the way.

------
kirkbackus
The second graph seems to truncate the first 15 years. I wonder if the data
exists, or if it didn't actually support the author's point. Also, I think the
author oversimplifies this issue.

I just don't see the connection where the direct cause of large corporate
profits is low wages. Are the wages adjusted for inflation?

------
jobu
Is there any way for an average working schmuck like myself to capture some of
these windfall corporate profits?

Invest in stocks with sizable dividends?

~~~
dclowd9901
The returns are so paltry as to be laughable. Five percent a year? Yeah, enjoy
that retirement.

If you really want to take advantage, start a business. Guess what? There's
some cheap fucking labor out there, and you can easily undercut a dinosaur.
Share profits with your employees and advertise it. Try to get ahead of a
movement that is almost surely coming in favor of companies that treat their
employees well.

------
tsotha
It's almost like importing a million legal immigrants and another million
illegals every year has some downward effect on wages.

~~~
woah
dey took our JEEERBS

~~~
tsotha
Go back to reddit.

------
dclowd9901
So, we've done the environmentally-conscientious boycotts. We've done the
healthy food boycotts. You know where I'm going with this...

Is there anywhere we can find out whether a company provides its employees
meaningful wages and benefits (in relation to its corporate earnings)? Also,
if anyone's knowledgeable on this, is it generally more beneficial to just buy
from privately-owned companies (vs. publicly traded)? I would love to start
buying exclusively from co-ops.

~~~
curun1r
I'm not sure about corporate earnings, but there are a bunch of lists on the
internet that compare average worker compensation with CEO compensation and
CEO compensation usually correlates pretty well with company profits.

Here's one such list: [http://go.bloomberg.com/multimedia/ceo-pay-
ratio/](http://go.bloomberg.com/multimedia/ceo-pay-ratio/)

~~~
dclowd9901
This is _exactly_ what I was looking for. Thank you!

------
limejuice
"But they’ve still managed to boost profits beyond anything ever seen before
because they’ve got away with employing as few workers as possible at as low a
rate as possible."

I think there are other factors.

1\. US _effective_ corporate tax rate has been declining as corporations have
found ways to keep profits in offshore tax havens. This is a huge contributor.

See for example this article about AAPL whose effective tax rate is 14% which
is much lower than the US nominal corporate tax rate of 35%.

[http://www.bloomberg.com/news/2013-05-23/apple-tax-rate-
igno...](http://www.bloomberg.com/news/2013-05-23/apple-tax-rate-ignores-
profit-shifting-offshore.html)

2\. Outsourcing to lower cost centers. This is also contributing to lower US
wages; If a company can move the work to India, Brazil, China, etc. at a much
cheaper cost, they will do that. This has been going on for decades, but
advancements in telecommunications and internet has made outsourcing to far
away locations more efficient and cost effective over the past 10-15 years.

3\. Federal reserve keeping short term rates at 0% and manipulating other
fixed income rates with the QE program, e.g. buying $100BLN worth of MBS and
US treasuries every month. This had the effect of creating record-low interest
rates for corporate and junk bonds. This lowers interest costs for companies
and also increases business demand because more companies are able to borrow
$$ than otherwise.

Some of the revenues and profits are increased just because corporate and
public debt has increased abnormally.

------
phamilton
So another angle on this that I've heard is one of increased efficiency. The
economic downturn forced a lot of companies to get more done with less. Once
the revenue picks up again, the business realizes that they didn't need all
those extra resources in the first place.

That could mean they hire fewer employees. It could mean they hire less
skilled employees.

Admittedly speculation, I just wanted to throw it out there as an additional
explanation.

~~~
tunesmith
That's where my thought was going too. If profits are high while unemployment
is also high, then it can't be that employers are far less socially
responsible than they used to be. They were never that charitable about hiring
workers to begin with. It must just be that they don't really need the
workers.

------
ahomescu1
What I feel is missing from their analysis is a breakdown of corporate profits
per employee, along with some hard figures, e.g., how much profit these
companies make per capita. It might or might not be enough to make a dent (for
example, $100 million split among 100k employees only comes to around
$1000/year for each of them).

------
nevocus
Is there causality really going on with both trends? Maybe the US stopped
being a great place to invest and hire people...

------
skrowl
If wages in the US were low, they wouldn't be outsourcing labor to other
countries. Reuters must not have realized how many things have "Made in China"
stamped on them.

~~~
dkuntz2
And those things don't count as part of the US' GDP. And only count as part of
the GNP if they're owned by a US company.

~~~
NoPiece
The value of imported goods are subtracted from GDP, but their sales price is
added to GDP.

------
sgarg26
If wages are low, does that somewhat signify that many of the corporation's
business functions are staffed with skilled workforce that is in oversupply?

------
wavesounds
Isn't this really a problem of corporate/investment taxes so low (and full of
loopholes) and taxes on everyone else so high?

For the average person once you add up federal income tax, state income tax,
social security, medicare, medical, sales tax, gas tax and all the other
government fees we end up paying its like 50% of your income going to the
government.

We could essentially double most of the countries pay overnight which would
have a stimulating effect on the economy as a whole creating more consumers
for more products and thus more jobs and more returns on investments.

~~~
gmac
By eliminating all personal taxes? Yeah, easy win ... Unless you like crimes
to be punished, fires to be put out, kids to be educated, people not to be
dying of poverty, and oh, a couple of other things.

~~~
ahomescu1
A lot of those are currently funded (in the US) from local taxes: property and
sales tax (at least that's how it is where I live, in a California county).
School, police and fire departments are locally-funded. Getting rid of income
taxes would not impact these. (EDIT: the GP was proposing abolition of all
personal taxes, but the one that comes up the most in discussions is the
personal income tax; we could just eliminate that one).

~~~
mikeyouse
For the record, ~10% of California's K-12 budget comes from Federal funds,
$5.5 Billion in 2009.[1] The Feds pay hundreds of millions per year in grants
to local Police forces[2] and similarly large amounts to firefighters.[3]

[1] -
[http://www.cbp.org/pdfs/2009/090202_SFF_HowSchoolsGetTheirMo...](http://www.cbp.org/pdfs/2009/090202_SFF_HowSchoolsGetTheirMoney.pdf)

[2] -
[http://www.cops.usdoj.gov/Default.asp?Item=2367](http://www.cops.usdoj.gov/Default.asp?Item=2367)

[3] - [http://www.fema.gov/welcome-assistance-firefighters-grant-
pr...](http://www.fema.gov/welcome-assistance-firefighters-grant-program)

