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Nir Kaissar: Economic Sentiment versus Reality - [Making Markets, REPLAY]
Making Markets
Understanding Wage Stagnation Amid Rising Corporate Profits
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Wage stagnation persists despite rising corporate profits, raising questions about the disconnect between market growth and worker compensation. Companies report difficulty hiring, yet wages do not reflect this demand. A lack of transparency in compensation data hampers understanding of the issue, as public companies are not required to disclose employee pay information. Notably, profit margins for U.S. public companies have significantly increased, tripling from 4% in 1993 to 12% in 2021, while wages remained unchanged. This suggests that profit growth has disproportionately benefitted capital over labor, with productivity gains not being shared with workers. Historical trends show that post-World War II through the 1980s, wages aligned closely with productivity increases, a shift that has since been influenced by factors including increased monopolistic power, industry concentration, technological advancements, and a decline in organized labor. The culmination of these factors may have led to the current imbalance in the allocation of gains between capital and labor.
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