It is standard wisdom that globalization has led to a redistribution from wages to profits. In fact, an NYT column by Tyler Cowen actually presents this redistribution as a reason to cut Social Security and Medicare benefits. (For low income workers, the cuts are offset by contributions to private accounts.) I hate to ruin a story line with evidence, but the profit share of corporate income just returned to the level of the 90s' cyclical peak this year. Since profits are usually revised downward, it remains to be seen if we will exceed the profit share of the 90s cycle in the current cycle. While there was a shift from wages to profits in the 80s and 90s, if we don't cross the 90s profit peak in this cycle, it would mean that the huge increase in trade and the trade deficit over the last decade did not lead to a redistribution from wages to profits. This implies that globalization does not necessarily entail a shift from wages to profits. Of course, most workers have benefitted little from the economic gains over this period, as the median wage has risen by only about 5 percent over the last decade. There was redistribution in this story, but it went to the high end workers who are largely protected from the effects of globalization (CEOs, doctors, lawyers, Wall Street investment bankers). Those who want to alter a pattern of economic development that produces little benefit for the bulk of the population better at least be clear on where the money is going.
--Dean Baker
