Where Do Profits and Jobs Come from? Employment and Distribution in the Us Economy

31 Pages Posted: 9 Aug 2018 Last revised: 11 Feb 2020

See all articles by Lance Taylor

Lance Taylor

The New School - Bernard Schwartz Center for Economic Policy Analysis (CEPA)

Ozlem Omer

New School for Social Research

Date Written: April 18, 2018

Abstract

“Meso” level analysis of 16 producing sectors sheds light on broad forces shaping growth of employment and profits. In a growth decomposition from 1990 through 2016, employment responds positively to output increases and negatively to rising productivity. The macro profit share responds positively to sectoral productivity and demand shifts, and negatively to real wage increases. The decomposition weights suggest that wage repression raises profits in business services, education and health, wholesale and retail trade, and parts of manufacturing. Observed profit growth was robust in manufacturing, trade, finance and insurance, and information. The latter two (and wholesale trade) benefitted from favorable demand shifts. However, they generate less than a quarter of total profits. Owners of real estate receive more than a quarter but their share is not increasing. Growth of the remaining one-half of profits has been due to demand shifts and productivity growth which exceeded real wage increases. Market power matters in all sectors. The strongest effects may act against employment and real wages in labor markets.

Keywords: income distribution, wealth, monopoly power, rents, low wages

JEL Classification: D31, D33, E2, E12, E24, J40, L11

Suggested Citation

Taylor, Lance and Omer, Ozlem, Where Do Profits and Jobs Come from? Employment and Distribution in the Us Economy (April 18, 2018). Institute for New Economic Thinking Working Paper Series No. 72, Available at SSRN: https://ssrn.com/abstract=3228720

Lance Taylor (Contact Author)

The New School - Bernard Schwartz Center for Economic Policy Analysis (CEPA) ( email )

80 Fifth Ave.
5th Floor
New York, NY 10027
United States

Ozlem Omer

New School for Social Research ( email )

6 East 16th Street
New York, NY 10003
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
11
Abstract Views
285
PlumX Metrics