Share of Economy Going to Wages and Salaries Drops for Unprecedented 14th Straight Quarter
End Notes
[1] This analysis examines data since 1947 because quarterly data are not available before then.
[2] Total compensation — which includes wage and salary income, employer contributions to insurance and pensions, and employer contributions to social insurance — fell by 3.1 percentage points over the 14-quarter period. This, too, is the largest drop on record.
[3] Rising employer payments for health insurance premiums partly reflect the acceleration in health care cost growth, which may not appreciably benefit covered workers. In addition, many employers with pension plans that promise a defined benefit to workers have had to increase their pension contributions to make up for the drop in the stock market, which reduced the value of pension plans’ portfolios. The increased contributions were necessary to assure payment of the promised pension benefits. In this respect, the current increase in pension contributions makes workers no better off than they were before, since many workers would still expect to receive the same pension benefit that was promised previously.
[4] In the 14 quarters after economic peaks, wage and salary increases were larger prior to 1970 than they have been in more recent decades. Still, the current period compares unfavorable to the post-1970 periods as well.
[5] David Kamin and Isaac Shapiro, “An Uneven Recovery: New Government Data Show Corporate Profits Enjoying Unusually Large Gains, While Workers’ Incomes Lag Behind,” Center on Budget and Policy Priorities, September 3, 2004. Our previous analysis measured wage and salary income relative to “national income,” a slightly different basis of comparison from the “gross domestic product” standard used here. For technical reasons, it is preferable to use national income for these comparisons, but this measure is not yet available for the third quarter of 2004. The essential story remains the same regardless of whether national income or GDP is used.