NCPA - National Center for Policy Analysis

Profits, Not Inflation, Lifting Wages

March 16, 1998

In some sectors of the economy, productivity and profit increases -- rather than tight labor markets and inflation -- are pushing up wages, according to economist James Glassman of Chase Securities Inc.
  • Private sector compensation growth -- which measures changes in both wages and benefits -- accelerated to 3.4 percent at the end of 1997 from 3.1 percent the year before.
  • Much of the 1997 rise was due to an unusual surge in the finance, insurance and real estate sectors, according to Glassman.
  • Slowdowns in manufacturing and trade compensation were offset by modest pickups in services and transportation.
  • Pretax profits margins of financial corporations surged to 20 percent late last year -- from 15.3 at the end of 1996 -- despite more generous payouts to employees.

Source: Gene Koretz, "Are Profits Lifting Wages?" Business Week, March 16, 1998.


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