Reich: since 2009 national income going to workers has fallen in the US, while rising in Europe [View all]

[pampango]

So far, the US has avoided the kind of budget cuts that have pushed much of Europe into recession. Growth on this side of the pond is expected to be around 2.4 per cent this year. And jobs are recovering, albeit painfully slowly.

Meanwhile, real wages in the US continue to fall. A new “World Outlook” released by the International Monetary Fund last Friday showed that in the three years since the depths of the downturn in 2009, total national income has rebounded in most of Europe and in the US. But the share of national income going to workers has fallen sharply in the US, while rising in Europe as a whole.

The trend is even more striking measured from the start of the recession. It used to be that when a downturn began, profits fell faster than workers’ income because companies were reluctant to lay off employees and couldn’t easily cut wages given union contracts or the threat of unionization.

That is still the case in Europe, courtesy of stronger unions and labor-market regulations. But it is no longer the rule in the US. Since the start of the recession, the share of total US national income going to profits has risen even as the share going to the workforce has plunged. Profits in the US corporate sector are now at a 45-year high.

The trend is all the more remarkable considering that the share of national income going to workers used to be substantially higher in the US than in Europe because Americans have to buy what most Europeans receive free – including university education and healthcare.

http://robertreich.org/post/24103659262

Despite all of Europe's problems in the last few years the share of national income going to workers had increased while it declined in the US.