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November 02, 2013

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Anonymous

Presumably the profit figures used in the analysis are calculated AFTER interest payments due to finance creditors have been deducted.

If so, then the analysis might be improved by comparing value-added appropriated by capital to value-added appropriated by labour. Using this metric, the capital appropriation would be the sum of interest paid to finance creditors and pre-tax profits. The modified metric could well show that capital is doing better than the analysis indicates.

For completeness sake, it MAY be useful to incorporate the government's share in value-added (ie tax).

Jim

Um, you've forgotten the other part of the National Income calculation - taxes. Could you enlighten us as to whats happened to that over the same time period?

Neil Wilson

The problem is that data is produced for the income measure of GDP which has a different target than the one in this article.

Government doesn't hoard the 'taxes on production'. They offset its expenditure on goods and services - which are people's wages and profits.

The accounts system doesn't capture that because the split on the numbers measure 'Gross value add', not 'Gross Domestic Product' allocated to wages and profits.

Similarly the 'other income' is the profits and compensation from the businesses of sole traders. That has steadily grown over the years. And this is classified as 'entrepreneurial income' in the national accounts systems.

So I would suggest that the premise of the article is incorrect, since the numbers used do not capture accurately the split of *GDP* between Wages and Profit.

Chase

Isn't it a bit of an assumption to presume income going to labor instead of rent is 'many' vs the 'few'? I would think you have to look at share of labor income going to the few vs the many. In the U.S. wages for executives have skyrocketed while lower end wages have stagnated. Seems incomplete.

aragon

Duncan is wrong is a relative inflation problem, especially of the price of the basics vs the low income (as opposed to all incomes).

For example 10% (compounded over years) energy inflation especially when applied to the standing charges.

And what are profits with the extent of intracompany transfers and tax avoidance.

http://www.independent.co.uk/news/uk/politics/eurobond-tax-scandal-tax-avoidance-figure-is-just-the-tip-of-the-iceberg-margaret-hodge-tells-hmrc-8909553.html

But the Two Ed's analysis and actions are superficial, hence the twenty month energy price freeze and one year living wage rebate.

Superficially attractive but ineffectual.

Deviation From the Mean

Useful and interesting information.

I have to agree with chase though about the breakdown of wages. The story of the Neo liberal period has been the massive remuneration going to the CEO's and high management.

I think Simon Mohun's attempts to develop a 'class' definition of profit is the correct basis that Marxists should be developing their theories.

Prateekbuch

Chris, unless you account for the distibution of the wage share, surely it is not enough to take the aggregate share going to wages and say "enough is going to the many?" A absurd example would be if one bloke - let's call him Mr Rich - took home all the wages in the land, leaving none for everyone else, but he had a pay rise, the wage share would rise, no? An analysis of what's happened to median salary over the same time period - a bit more sophisticated than my attempt at http://planc.socialliberal.net/on-wages-income-and-employment/ - might show something different...

chris

@Chase, Prateekbuch - yes, the share of wages going to the v. rich has risen, which means my chart flatters the income going to the many.
http://topincomes.g-mond.parisschoolofeconomics.eu/#Database:
And of course, I believe there's no good justification for that. However:
1. this is a long-run development, and not merely an artefact of the recession.
2. Ed 's not going to do much if anything about this.

Ben Southwood

All plausible and convincing except that high propensity to spend is good. High propensity to spend is bad for civilization and society in the long run, and it's indeterminate whether it's good for the individuals right now (depends on their utility functions). So on balance we probably want less spending, although we might prefer less consumption coming voluntarily to forced saving for a given level of consumption.

Art

It would also be helpful to see the percent of corporate profits that ultimately flow to the wealthy versus those that flow to the average citizen.

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