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February 22, 2018


Luis Enrique

seen this argument that US mark-ups have been overstated because of mis-measurement?



In that 1st graph, I do NOT see a stable relationship between Wages & Profits. I see 2-3 separate regimes:

1. Post-war era: union power & relatively paternalistic management give middle classes good wages
2. Reagan/Thatcher/MBA revolution: kill the unions, kill the middle classes, transfer all the money (back?) to the rich.
2a. ...with a (temporary?) bulge in Wages from the Tech Boom/Bubble years 96-00? Or did Clinton do something that GW Bush "fixed"?

Perhaps a longer-term graph (centuries?) would show that the recent regime (concentration of wealth/power) is a return to the historical norm where oligarchs rule until their local system collapses. Whatever - political change (ballots or pitchforks) seems like the only way to revive the middle classes.


Re Luis' "Are Markups Increasing": I'm not buying it.
1. Study ignores FIRE sector, which has tilted Wage/Profit balance just by growing so much.
2. Huge increases in Corp SGA includes CEO pay (including Stock Options?) and other costs which aren't traditionally "variable". Some of the more insidious aspects of the MBA revolution were "small" changes in Cost Accounting techniques. Some of these have nasty macroeconomic results.
Example: Counting Overtime as a Direct Cost of production irrationally overstates the costs of parts worked on Friday-Sunday. OT on Direct Labor was previously - and IMHO, should be - counted as Overhead, a cost of Management's choice to avoid hiring enough people to do the work in 40 hours. The MBA way disguises this choice as an inevitable Direct Cost. (Note: I'm a Computer Programmer with Cost Accounting experience across 30 years in Manufacturing, in USA)

Mark Wadsworth

Here's my numbers question for you or flipchart Rick:

Total private sector wages approx £600 bn a year, we know that.

Most sources say total corporate profits £200 bn a year, seems a bit high but not totally excessive.

Other sources say total profits £400 bn a year, if true, that is rapaciously excessive

Mark Wadsworth

I'm not even convinced that profits are that relevant. What matters is dividends, about £100 bn a year. The other half of profits are reinvested, so benefit future shareholders and employees in same one to six ratio.

DBC Reed

Do these calculations of profits include rents? If not they are useless.As the earliest economic radicals, the Physiocrats up to Henry George, established, it doesn't matter how much people receive in wages if the whole lot is subsequently swiped by high rents and mortgage repayments. I fail to see how the present situation for the UK's younger generation can be described as anything other than state-sanctioned torture by rent.

Luis Enrique

Interesting kernel, thanks. You should email the author

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