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Joint Economic Committee Democrats Chairman - Senator Martin Heinrich (D-NM)

Corporate Profits are Growing Much Faster Than Employee Compensation

August 20, 2018

Weekly Economic Snapshot  - 8/20 - 8/24

Economic Facts for This Week

  • Last year, the United States reported the first increase in homelessness in seven years. More than 550,000 people were estimated to be homeless on a single night, including more than 40,000 veterans and over 40,000 young people. 
  • CEO pay at the largest 350 companies in America grew 17 percent last year, hourly wages for production and nonsupervisory workers grew 0.2 percent.
  • The Trump administration’s proposed rules on the Republican pass-through deduction will make the deduction even more titled to the wealthy than initially projected.
  • A new survey of DACA recipients shows that 96 percent are either employed or enrolled in school. It also shows that the Trump administration’s decision to revoke DACA protections created widespread anxiety among recipients.
  • When Tennessee disenrolled 170,000 people from Medicaid in the early 2000s, individuals lost access to health care, reported worse health, and did not see any noticeable increase in employment.

Chart of the Week

Corporate profits have grown substantially faster than employee compensation in recent decades. While the two measures tracked closely for most of the 20th century, workers have shared less of the gains more recently. Since 2000, employee compensation has increased 28 percent after inflation and corporate profits have increased 107 percent. Compounding this problem for many families, the gap between top earners and the average worker at corporations has also grown. In 1965, a CEO at one of the largest 350 companies in America made 20 times as much as the average worker in their industry. Today CEOs at the largest 350 firms average 312 times more, earning an average of nearly $19 million last year.

Tracking Trump’s $4k Promise

During the tax cut debate, the White House claimed that the average American household would see an income increase of $4,000 a year because of the tax cuts. Below are some indicators looking at whether or not Republicans are living up to their promise:

  • Stock buybacks are at record highs, with public companies announcing more than $750 billion in stock buybacks so far this year. Goldman Sachs projects buybacks could soar to $1 trillion by the end of 2018.
  • Average weekly wages for production and nonsupervisory workers are just 2 percent higher than they were before the new tax law, before adjusting for inflation.
  • The average hourly wage for production and nonsupervisory workers—our best measure of the median workers’ take home pay—was lower in July 2018 than it was in July 2017, after adjusting for inflation. This is the third straight month of year-over-year declines in real wages.

ICYMI

  • The latest economic projections from CBO show that any growth bump from the Republican tax cut will be short-lived, and that the long-run growth rate remains low.
  • President Trump’s import tariffs are likely to reduce exports as well as imports, according to Federal Reserve economists.
  • New research provides evidence on who is most likely to default on their student loans. Those most likely to default are borrowers with other collections debt, like medical or utility debt, those with small student loan balances, and those who have low credit scores.

Coming This Week

Permalink: https://www.jec.senate.gov/public/index.cfm/democrats/2018/8/weekly-economic-snapshot

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