Letter: Declining GDP share

Published: Monday, May 26 2014 12:00 a.m. MDT

Updated: Sunday, May 25 2014 10:10 p.m. MDT

I have seen several letters and op-ed pieces in your paper recently discussing inequality. I believe all of them have missed the fundamental point in the debate, which is the declining share of GDP going to wages and salaries. The share going to labor was so steady for so many decades that economists began to assume that it was a basic law of economics.

According to a study done by the Federal Reserve Bank of Cleveland, the labor share averaged around two-thirds of GDP for the entire post-war period. It peaked at just over 70 percent of GDP in the late 60s. It started to decline around 1980, gradually at first but accelerating sharply after 2000. It has continued to drop sharply ever since and is now down to the 50 percent range. This is a gigantic drop and it affects every single working person in the country.

If the distribution of income were the same today as it was in 1980, middle-income families would make $12,000 per year more than do now. So, if you are an average working family that means that $12,000 per year is coming out of your pocket and going into the pockets of corporations and the super-rich.

Adam Smith warned that we should be wary of employers who colluded to suppress the wages of their workers, but that is exactly what we have been seeing on a massive, global scale for the last 30-plus years.

Roland Kayser

Murray

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