Chart of the Day: Working Americans Get Smaller Slice of Pie
"Working Americans are now getting the smallest slice of the income pie on record — which, combined with high unemployment, could be behind the slow speed of the economic recovery.
"The decline is not a new trend, but it shows up again in last week's release of third-quarter productivity and costs. The labor share — the amount paid to workers instead of businesses and other income-earning entities — was reported to have fallen to 57.1 cents on the dollar for the business sector, its lowest level since it was first reported by the Bureau of Labor Statistics in 1947.
"J.P. Morgan economist Michael Feroli highlighted the decline in a recent note. He said the pre-2000 average for labor share was 63.9 cents, and if it were still at that level household income would be $780 billion higher, a helpful boost in a period of high unemployment. Even at more recent levels, income would have been $400 billion higher, he says."
One reason for the decline?
"Prior to 1983, a rise in the unemployment rate was accompanied by a counter trend rise in labor share. But that has reversed and now as unemployment worsens, the labor share falls, reflecting a change in corporate behavior. Companies may have previously more been bound by union contracts or discouraged by hiring and firing costs in the past. "
The data is pretty clear: as union membership has dropped, so has middle-class income: