The Wageless, Profitable Recovery
By STEVEN GREENHOUSE
Economists at Northeastern University have found that the current
economic recovery in the United States has been unusually skewed in
favor of corporate profits and against increased wages for workers.
In their newly released study, the Northeastern economists found that
since the recovery began in June 2009 following a deep 18-month
recession, “corporate profits captured 88 percent of the growth in real
national income while aggregate wages and salaries accounted for only
slightly more than 1 percent” of that growth.
The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession
of 2007-2009,” said it was “unprecedented” for American workers to
receive such a tiny share of national income growth during a recovery.
According to the study, between the second quarter of 2009, when the
recovery began, and the fourth quarter of 2010, national income rose by
$528 billion, with $464 billion of that growth going to pretax corporate
profits, while just $7 billion went to aggregate wages and salaries,
after accounting for inflation.
The share of income growth going to employee compensation was far lower
than in the four other economic recoveries that have occurred over the
last three decades, the study found.
“The lack of any net job growth in the current recovery combined with
stagnant real hourly and weekly wages is responsible for this unique,
devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar
Khatiwada, Joseph McLaughlin and Sheila Palma.
According to the Bureau of Labor Statistics, average real hourly
earnings for all employees actually declined by 1.1 percent from June
2009, when the recovery began, to May 2011, the month for which the most
recent earnings numbers are available.
The authors said another factor explaining the weak performance for
aggregate wages and salaries was the slow growth in weekly hours during
the recovery. At the same time, worker productivity has grown just under
6 percent since the recovery began, helping to keep employment down
while lifting corporate profits, the study said.
Professor Sum noted that the aggregate wage and salary figures exclude
employer contributions to benefits and payroll taxes, while they include
bonuses, overtime, commissions and tips.
He said that nonwage benefits rose in real terms by $27 billion during
the first seven quarters of the recovery. “These small gains were
exactly offset by a similar $27 billion loss in real wages and salaries
over the same time period based on newly released data from the Bureau
of Economic Analysis,” he said. “It was a wageless and jobless
The study called that $27 billion loss in aggregate wages and salaries
during the seven quarters after the recovery began “the first ever such
decline in any post-World War II recovery.”
The study said that of the previous recoveries since the 1970s, the
recovery following the 2000-1 recession was next worst in terms of the
share of increased income going to wages and salaries. The study found
that 15 percent of income growth went to aggregate wages and salaries in
the six quarters after the recovery began following that recession,
while 53 percent went to corporate profits. The growth in national
income can also go to net interest, rental income or proprietors’
The story was very different for the recovery that began in 1991. In
that recovery, 50 percent of the growth in national income went to wages
and salaries during the first six quarters after the recession ended,
while corporate profits actually fell by 1 percent during that period.
With regard to corporate profits, the report noted that the preliminary
estimate for the first quarter of 2011 was $1.668 trillion, an increase
of $465 billion of just under 40 percent since the recovery began.
“Aggregate employment still has not increased above the trough quarter
of 2009, and real hourly and weekly wages have been flat to modestly
negative,” the report concludes. “The only major beneficiaries of the
recovery have been corporate profits and the stock market and its