March 25, 2016
The wage share of GDP has recovered close to half of the ground lost in the downturn. Combining economy-wide wages and corporate profits, the wage share fell by 3.6 percentage points between 2007 and 2012. The data for 2015 show that the wage share has increased by 1.6 percentage points since its trough in 2012. This indicates that a tighter labor market is now allowing workers to achieve some gains at the expense of corporate profits.
This means a huge amount for Federal Reserve Board policy going forward. If the Fed raises interest rates to slow growth and job creation, it can prevent workers from recovering the ground they lost in the downturn.
It is striking that only one presidential candidate, Senator Bernie Sanders, has raised this issue. The others have for some reason chosen not to discuss the Federal Reserve Board and its impact on workers’ living standards. (Senator Ted Cruz has discussed the Fed, but said that he wants to bring the gold standard. This would prevent the Fed from taking any steps to boost the economy in a downturn.)
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