Those ‘Wage Increases’ Stories Miss the Big Picture

Today on TAP: As a share of the economy, profits hit an all-time high, and wages for the bottom 90 percent an all-time low.

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With employers scrambling to fill key positions, wages are rising in a host of workplaces. If not the dawning of the Age of Aquarius, it’s at least the beginning of a new, more egalitarian economy—right?

Wrong. More precisely, very, very wrong.

With all the disruptions to normal life over the past couple of years, readers will be relieved to know that our nation’s march to record economic inequality has not slowed. The U.S. Bureau of Economic Analysis reports that after-tax corporate profits hit an all-time high as a share of the economy in the third quarter of this year, reaching a previously unheard-of 11 percent. That broke the previous record of 10.7 percent, which was set in the second quarter of this year.

And if the share going to profits is rising, the share going to some other economic components must be falling. Earlier this week, Larry Mishel and Jori Kandra of the Economic Policy Institute published a report on the distribution of wages that noted yet another record set. In 2020, the report concluded, the wages of the bottom 90 percent of wage earners constituted the lowest share of all wages paid in a single year since the government began charting such things in 1937. The bottom 90 percent earned just 60.2 percent of all wage income last year. To be sure, this reflected the pattern of who got laid off and who didn’t in the course of the pandemic, but it also marked the continuation of a long-term trend. Since 1979, the report documents, the wages of the top 1 percent rose by 179 percent (and those of the top 0.1 percent by 389 percent!), while those of the bottom 90 percent crept along with a 28 percent increase.

So while the media is full of stories of wage increases for low-wage workers, don’t be misled: Our economic inequality is roaring ahead!

Woo-hoo.

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