The headline, “Labor vs. Capital,” is not mine; it’s the Wall Street Journal’s. And the argument is,
For decades, labor’s share of American national income has shrunk while the share that goes to profits has expanded.
There are now tantalizing signs that labor may finally be gaining ground on capital.
Workers in the first quarter of the year recorded their biggest annual gain in pay since 2008, evidence that a steady decline in unemployment is finally having an effect on paychecks.
That’s because, according to latest numbers from the Bureau of Labor Statistics [pdf], the wage and salary portion of the employment cost index increased by 0.7 percent during the first quarter of 2015 and 2.6 percent for the 12-month period ending March 2015 (as one can see in the chart above), which was higher than the 1.6-percent increase in March 2014.
But we have to remember that workers’ share of income has been declining for decades, which means that a big chunk of the growth that has occurred during that period has gone to profits, shareholders, and a tiny group at the top of the distribution of income.
It’s going to take much more than a 2.6-percentage annual rise in the wage and salary component of the employment cost index—even if sustained for many years—for workers to really gain ground on capital.