I will add very little, other than pointing to this pair of interesting income related articles over the past 24 hours.
First up: Bloomberg:
"American workers have rarely taken home a smaller share of the nation’s prosperity, a condition that is undermining bipartisan support for free trade and creating friction between President George W. Bush’s administration and the Federal Reserve.
After 16 consecutive quarters of economic growth, pay is rising at a slower rate than in any similar expansion since the end of World War II. Companies are paying less of their cash gains in the form of wages and salaries than at any time since the Great Depression, according to government figures . . .
"There is no doubt that something is happening” to reduce labor’s share of income, says Robert Solow, a Nobel Prize-winning economist and professor emeritus at Massachusetts Institute of Technology in Cambridge. An economy that doesn’t distribute its gains widely is "poorly performing,” he says.
From the final quarter of 2001 through last year’s third quarter, total compensation paid to employees by corporations, including health benefits, rose at a 4.3 percent average annual rate, according to government figures. That’s the slowest growth for any similar period in post-war expansions lasting at least four years.
Stripping away benefits, corporate wages and salaries rose at a 3.4 percent annual rate in the 16-quarter period, the slowest of any post-war expansion lasting that long. Wages and salaries as a share of the cash corporations are generating from the expansion stood at 51 percent in the second and third quarters, the lowest in government records going back to 1929. Including benefits, labor’s share was the lowest since 1997. (emphasis added)
Next, The WSJ:
"A distinguishing feature of the U.S. economy of the past quarter-century is a sharp increase in economic inequality. No matter how you slice the data, very well-paid folks have done better than the rest.
But what changed the U.S. economy around 1980? Do those forces persist? Can or should government resist? Is computer technology the culprit? Is better education the answer?
Start with a couple of facts:
About 11% of income (and that’s not counting capital gains) went to the best-off ½% of Americans in 2002; 25 years earlier, they got 5.25%, according to Internal Revenue Service data crunched by University of California at Berkeley economist Emmanuel Saez.
Workers at the 90th percentile (those who earn more than 90% of all workers) earned 4.5 times as much as those in the 10th percentile in 2004; 25 years earlier, they were earning 3.5 times as much, according to Bureau of Labor Statistics data crunched by Harvard economist Lawrence Katz."
Why does this matter? Aside from the political ramifications, recall that over 70% of the economy is consumer driven. How much income goes to 99% of the population effects how much and on what they spend it.
Expansion Leaves Workers Behind, Creates Fed Friction
Craig Torres, Alex Tanzi
Bloomberg, January 17, 2006 11:11 EST
Inequality: an ’80s Legacy Or Worsening Now?
WSJ, January 19, 2006