27 November 2006

Wages at an All-Time Low - and that could be a good thing

Wages and salaries constituted only 45% of the GDP last year - the lowest it has been since records were kept in 1929. I think that could be a good thing.

How could a populist applaud the erosion of the working man's wages? Well, one other large component of the GDP is corporate profit. And the fact that everyone keeps forgetting is that in just the last few decades, the ownership of corporations has been rapidly dispersed to a wider and wider group of people. As corporate profits account for a higher percentage of GDP, profit-sharing can be more widely dispersed. Lower wages doesn't necessarily translate into lower household incomes.

The return to knowledge work is wages and salaries. The return to entrepreneurship is profit. As we manage to popularize entrepreneurship (one component of which is the dispersion of corporate ownership), we should encourage the fact of households getting a higher percentage of income from profits.

The point is not to bemoan a decrease in incomes as a percentage of GDP. The point is to insist on an increase in profit sharing so that individuals' goals are aligned with their employers and so that the resultant increase in shared profits and wealth more than compensates for a relative decline in wages.

1 comment:

Daryl Morey said...

Also, wages buy much much more now for the same dollar. This is also overlooked.