NCPA - National Center for Policy Analysis

Wages VS. Profits

October 4, 1995

There is substantial evidence that the wages of American workers are not falling, despite assetrtions to the contrary.

  • Commerce Department statistics show personal consumption spending rose 39% from $9,602 in 1973 to $13,372 in 1993 - as measured in constant 1987 dollars.
  • The size of the average new home increased from 1,500 square feet in 1970 to 2,095 in 1993.
  • Other signs of growing wealth - the proliferation of personal electronics, computers and communications equipment - belie the assertion that living standards are falling or stagnant.

In fact, employee incomes and corporate profits have stayed at about the same percentage of national income - 75% and 10% respectively - for 25 years.

What has changed is that employees are taking home a smaller percentage of income in cash, with more going to Social Security, Medicare and employer-sponsored fringe benefits.

  • In 1970, employees received 66.4% of their income in cash, 3.9% in fringe benefits and other such payments, and the government took 3.4% for Social Security and unemployment insurance.
  • By 1994, cash was down to 57%, fringe benefits had risen to 9.5% and social insurance ate up 8.6% of total compensation.
  • Between 1970 and 1994, income received in the form of transfer payments increased from 10.2% to 17%.

Source: John A. Barnes, "Are U.S. Wages Really Falling?" Investor's Business Daily, October 4, 1995.


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