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Q: Wage Policy ( Answered 5 out of 5 stars,   2 Comments )
Subject: Wage Policy
Category: Business and Money
Asked by: tribune-ga
List Price: $50.00
Posted: 13 May 2005 14:37 PDT
Expires: 12 Jun 2005 14:37 PDT
Question ID: 521422
What is the ratio of percentage increase in annual wages to percentage
increase in corporate profits in the United States?  How does this
compare with other countries?
Subject: Re: Wage Policy
Answered By: vercingatorix-ga on 31 May 2005 17:49 PDT
Rated:5 out of 5 stars
I've compiled Bureau of Economic Analysis data for corporate profits
and employee compensation from 1948 through 2003.

I looked at four data items:

* Pretax corporate profits adjusted for inventory valuation and capital consumption
* After-tax corporate profits adjusted for inventory valuation and
capital consumption
* Total employee compensation.
* Employe compensation from wages and salaries (excluding stock options, etc.)

I pulled compensation data solely for corporate workers, excluding
those who work for sole proprietorships, governments, and other
employers. I thought this data would provide a better apples-to-apples

Below, I have pasted growth numbers for each of the last five years
and annualized growth for three-, five-, 10-, 25-, 40-, and 55-year
periods. The 55-year period covers all the data from 1948 through
2003. I don't have 2004 compensation data broken out for only
corporate workers.

Before I give you the raw numbers, here are some interesting facts:

* Over the last 55 years, annual employee compensation has declined
just three times. Pretax corporate profits have fallen 19 times.
Profit growth is far more volatile than wage growth.
* Over the last three years, corporate profit growth has far
outstripped compensation growth.
* Over the long haul, compensation has increased at a faster rate than
corporate profits. In periods of 25 years or shorter, that trend has
* In 1948, corporations paid out three times as much in compensation
as they earned in profits. In 2003, corporations paid out nearly five
times as much in compensation as they earned in profits.
* Corporations appear to be benefiting from tax changes, as after-tax
profit growth outstripped pretax profit growth in most periods.
* Nonsalary compensation has become far more important in recent
years, with basic wage and salary growth considerably lower than total
compensation growth over the last three- and five-year periods.

Now, here are the numbers. They don't fit neatly in this format, but
should work fine if you paste them into a spreadsheet:

	2003 Growth	2002 Growth	2001 Growth	2000 Growth	1999 Growth	3-Yr.
Annualized Growth	5-Year Annualized Growth	10-Year Annualized
Growth	25-Year Annualized Growth	40-Year Annualized Growth	55-Year
Annualized Growth
Total  Compensation	2.9%	0.4%	1.5%	8.6%	7.3%	1.6%	4.1%	5.2%	6.3%	7.6%	7.2%
Wages and Salaries	1.6%	-1.4%	1.0%	8.5%	7.4%	0.4%	3.3%	5.1%	6.2%	7.3%	6.9%
Pretax Corporate Profits	17.8%	19.9%	-11.1%	-7.9%	4.5%	7.9%	3.9%	6.1%	6.1%	6.6%	6.3%
After-Tax Corporate Profits	14.3%	35.4%	-3.3%	-13.6%	4.6%	14.4%	6.2%	7.6%	7.1%	7.1%	6.7%

Request for Answer Clarification by tribune-ga on 01 Jun 2005 10:44 PDT
Looks good. Could you label those columns so I know what growth rates
apply to what periods.  Are they three year or five year intervals? 
Also what were the growth rates over the longer periods?  Clear this
and I will be glad to approve payment.

Clarification of Answer by vercingatorix-ga on 01 Jun 2005 11:53 PDT
Actually, the denotations are clear in my spreadsheet, but get fouled
up when I paste it here. So I'm going to attached the spreadsheet to a
Web site. I cut some columns when I tried to format it to post here.
Since I'm now keeping it in a spreadsheet, I added the missing columns
back. You can download the data at

tribune-ga rated this answer:5 out of 5 stars and gave an additional tip of: $10.00
Excellent Work.  Claim the $50 and my thanks as well.

Subject: Re: Wage Policy
From: financeeco-ga on 15 May 2005 15:42 PDT
These stats have garnered a lot of ink lately, but there's no simple
answer. The Bureau of Economic Analysis ( has a huge
collection of data (NIPA Tables). There you will find all of the raw
data to create your own US stats, depending on what you want to
include/exclude. Here's the problem:
1. do you include/exclude non-cash compensation earned by employees?
2. do you look at the pre- or after-tax profits of companies?
3. do you include/exlude financial companies (b/c financial companies
earn a big chunk of their profits with "no work" by employees...
interest rate and derivative speculation)
4. do you include/exclude things like inventory valuation adjustments
or capital consumption allowances?

All of those variables make it very hard to come up with a simple stat
for the US alone. Multiply this complexity by every additional country
you want to compare, and you find out why it's hard to find this info.
Good luck.
Subject: Re: Wage Policy
From: tribune-ga on 15 May 2005 21:53 PDT
To: financeeco-ga      Understood.  But if someone wants to take a
crack at US data alone and specify the necessary qualifications, it
would still be worth $50 to me.

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