Income Disparity

Informed opinion:

This statement appears rational. Globalization puts pressure on U. S. corporations to cut labor costs in order to stay in business.

However, if corporations are forced by competition to reduce labor costs, why are corporate profits as a share of the economy near their all-time high? Such profits make it particularly hard to argue that companies do not have the ability to support higher wages.

Data from the St. Louis Federal Reserve, hardly a radical institution, shows that corporate profits as a share of Gross Domestic Product have reached a record level.

http://opinionator.blogs.nytimes.com/2013/06/19/our-broken-social-contract/?_php=true&_type=blogs&nl=opinion&emc=edit_ty_20130620&_r=1

Before the 1980s, C.E.O. pay, according to Alan Krueger, the chairman of President Obama’s Council of Economic Advisers was set with close attention to norms of fairness, so that the range of compensation between janitors and top executives was kept within limits. This “social compact began to fray in the 1980s,” Krueger, argued in a Cleveland speech. He provided a chart, showing “how labor compensation has failed to keep pace with productivity growth.”

In my opinion the groundwork is being laid that will result in the eventual weakening of the national and world economies. Eventually less money in the pockets of the consuming public means less demand for products. When savings are exhausted and borrowing has reached its limit who will buy the widgets?

Paul Hunter