Bigger Corporations Are Making You Poorer
Despite recent electioneering posturing not enough public discussion about continually increasing monopoly power of corporations happens among policy regulators. So it was refreshing to read about research toward that end.
Below from MATT STOLLER at Vice:
A wave of new research shows how as corporations get bigger, the share of money out there going to actual workers declines...."experts are coming up with data showing just what it's costing Americans. And last week, economist Simcha Barkai presented his recent paper at a conference at the Stigler Center at the University of Chicago, suggesting corporate concentration leads to substantial declines in money going to workers across the country.
According to the paper, there's been roughly a 10 percent decline in what's known as "labor share" over the past 30 years. (Barkai's paper looked at the non-financial corporate sector, which encompasses roughly 80 million workers.) What this means is that out of the total number of goods and services produced by corporations, less of it by percentage terms (10 percent less) is going to pay for salaries and benefits—a.k.a. income.
What's behind this significant drop in this percentage of wealth going to labor? Various arguments have been presented over the years, like cheap Chinese imports displacing workers; there is some evidence for this. But perhaps the most popular explanation is that robots are taking jobs. This idea comes in part from Silicon Valley and was popularized by venture capitalist Marc Andreessen in a 2011 essay titled "Why Software Is Eating the World."
Is it Education?
..."no evidence for this in his study, which used government data from the Bureau of Economic Analysis. In fact, he found that spending on capital inputs, which includes robots, is declining even faster than spending on labor. As Barkai put it, "Measured in percentage terms, the decline in the capital share (30 percent) is much more dramatic than the decline in the labor share (10 percent)."
So where is all the money going? "Profits have been rising over time," Barkai said last week. And he put a number on it. "To give you a sense of how large these profits are, if you look over the past 30 years... per worker, how much have these dollars increased? It's about $14,000 per worker. And that's a really big number because, in 2014, personal median income was about $28,000." Barkai's models show that this effect is more pronounced in concentrated industries and less pronounced in competitive ones. Had concentration remained at the levels we saw 30 years earlier, one model in his paper suggested that wages, output, and investment would be substantially higher.
....among others, one trend that has puzzled some economists is why productivity, or the amount that an American worker produces with the same amount of machinery, isn't increasing as fast as it once did....corporate concentration may reduce firm investment and could potentially explain that, too.
Likewise, economist John Kwoka has shaken up the antitrust profession with work showing that mergers allowed by the Federal Trade Commission in concentrated industries lead to price hikes. And Justin Pierce, an economist at the Federal Reserve, found that companies that acquire manufacturing plants simply raise prices for the products those plants make, without increasing the efficiency of how those plants operate. Mergers are often justified as bolstering the efficiency of the companies being bought; Pierce's paper may undercut this rationale.
... In 2016, Federal Reserve Chair Janet Yellen noted that the 2008 financial crisis might prove a "turning point" for thinking in the economics profession....She suggested that the failure of small business to recover as quickly as larger corporations was a potentially significant factor in the ability of the Federal Reserve to organize an economic recovery.
"These findings bring to the fore critical and troubling trends that would otherwise be hidden from view," said Sabeel Rahman, a professor at Brooklyn Law School who specializes in the intersection between money and democracy. "Economic power and concentration increases inequality while also undermining economic dynamism. We need findings like these—and hopefully there will be further such studies to build on these papers—to shape a new wave of policy reform and debate over how to make the 21st-century economy inclusive, fair, and vibrant."
Below from MATT STOLLER at Vice:
A wave of new research shows how as corporations get bigger, the share of money out there going to actual workers declines...."experts are coming up with data showing just what it's costing Americans. And last week, economist Simcha Barkai presented his recent paper at a conference at the Stigler Center at the University of Chicago, suggesting corporate concentration leads to substantial declines in money going to workers across the country.
According to the paper, there's been roughly a 10 percent decline in what's known as "labor share" over the past 30 years. (Barkai's paper looked at the non-financial corporate sector, which encompasses roughly 80 million workers.) What this means is that out of the total number of goods and services produced by corporations, less of it by percentage terms (10 percent less) is going to pay for salaries and benefits—a.k.a. income.
What's behind this significant drop in this percentage of wealth going to labor? Various arguments have been presented over the years, like cheap Chinese imports displacing workers; there is some evidence for this. But perhaps the most popular explanation is that robots are taking jobs. This idea comes in part from Silicon Valley and was popularized by venture capitalist Marc Andreessen in a 2011 essay titled "Why Software Is Eating the World."
Is it Education?
..."no evidence for this in his study, which used government data from the Bureau of Economic Analysis. In fact, he found that spending on capital inputs, which includes robots, is declining even faster than spending on labor. As Barkai put it, "Measured in percentage terms, the decline in the capital share (30 percent) is much more dramatic than the decline in the labor share (10 percent)."
So where is all the money going? "Profits have been rising over time," Barkai said last week. And he put a number on it. "To give you a sense of how large these profits are, if you look over the past 30 years... per worker, how much have these dollars increased? It's about $14,000 per worker. And that's a really big number because, in 2014, personal median income was about $28,000." Barkai's models show that this effect is more pronounced in concentrated industries and less pronounced in competitive ones. Had concentration remained at the levels we saw 30 years earlier, one model in his paper suggested that wages, output, and investment would be substantially higher.
....among others, one trend that has puzzled some economists is why productivity, or the amount that an American worker produces with the same amount of machinery, isn't increasing as fast as it once did....corporate concentration may reduce firm investment and could potentially explain that, too.
Likewise, economist John Kwoka has shaken up the antitrust profession with work showing that mergers allowed by the Federal Trade Commission in concentrated industries lead to price hikes. And Justin Pierce, an economist at the Federal Reserve, found that companies that acquire manufacturing plants simply raise prices for the products those plants make, without increasing the efficiency of how those plants operate. Mergers are often justified as bolstering the efficiency of the companies being bought; Pierce's paper may undercut this rationale.
... In 2016, Federal Reserve Chair Janet Yellen noted that the 2008 financial crisis might prove a "turning point" for thinking in the economics profession....She suggested that the failure of small business to recover as quickly as larger corporations was a potentially significant factor in the ability of the Federal Reserve to organize an economic recovery.
"These findings bring to the fore critical and troubling trends that would otherwise be hidden from view," said Sabeel Rahman, a professor at Brooklyn Law School who specializes in the intersection between money and democracy. "Economic power and concentration increases inequality while also undermining economic dynamism. We need findings like these—and hopefully there will be further such studies to build on these papers—to shape a new wave of policy reform and debate over how to make the 21st-century economy inclusive, fair, and vibrant."
RSS Feed