How Is This Economic Recovery Unlike the Rest?

A recent study by a team of economists at Northeastern University’s Center for Labor Market Studies argues that the current economic recovery is the worst since World War II for worker pay and job growth — but the best for corporate profits. The headline:

Over this six-quarter period [from Q2 of 2009 to Q4 of 2010], corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income.

That’s right. Of the $528 billion in real national income gained between the second quarter of 2009 and the fourth quarter of 2010, pre-tax corporate profits accounted for $464 billion, while wages rose by just $7 billion. If you extend that out to the first quarter of 2011:

[C]orporate profits accounted for 92% of the growth in real national income while aggregate wages and salaries declined by $22 billion and contributed nothing to growth.

Wowsers. Here’s how those percentages compare to previous recoveries measured by the first six quarters of economic growth (Roman numerals designating the quarters):

  • 1975 I – 1976 II
    Corporate Profits Share of Growth in National Income: 32%
    Aggregate Wage and Salary Share of Growth in National Income: 38%
  • 1982 IV – 1984 II
    Corporate Profits Share of Growth in National Income: 28%
    Aggregate Wage and Salary Share of Growth in National Income: 25%
  • 1991 I – 1992 III
    Corporate Profits Share of Growth in National Income: -1%
    Aggregate Wage and Salary Share of Growth in National Income: 50%
  • 2001 IV – 2003 II
    Corporate Profits Share of Growth in National Income: 53%
    Aggregate Wage and Salary Share of Growth in National Income: 15%

HT: Roya Wolverson


Clifton Griffin

Perhaps businesses are adapting to these things over time and taking cues from past downturns?

It's hard to say, but I suspect there will be delayed benefits from this for American workers.

Uncertainty is driving businesses to run as lean as they can, lest they go under in a double dip (which it seems most people think is very possible). If and when things stabilize, I think we'll see those cash reserves reinvested in expansion and competitive wages.

When business is down 20% in 2 years, the last thing you're thinking about is hiring more people.


Workers will never get their rights back, or their wages.

I am at a company where we work 1-2 hours unpaid overtime every day. The company says even wage workers making $15 and less per hour are Exempt employees. But everyone is afraid to speak out because they know the company will find a "legal" way to fire them for demanding FLSA be followed.

The only hope is to move to management and on to ownership. Workers are screwed.

john Davidson

I think the main reason is structural. Jobs are being outsourced to cheaper labour and companies are more computerized (roboticized). With job insecurities and a clamping down on supports to ordinary people consumer demand does not encourage companies to hire more people. A lot of rethinking is required, but I only see old style thinking at the top (actually mostly in opposition to the top).


I will let Krugman do the talking;

"So where’s the evidence of a structural rise in unemployment in America? Wage growth is slowing; core inflation is falling; clearly, we’re not hitting an inflationary wall right now. Maybe the wall is closer than it seems — but then you look for evidence of skills in short supply, regions without enough workers, and so on, and it isn’t there.

As far as I can tell, the only economists who believe that we’re suffering largely from a rise in structural unemployment are those who are ideologically committed to the view that the demand side of the economy doesn’t matter — and so by definition, in their universe, any large rise in unemployment must be structural."


Mike B

I am sure that many people would like to blame Corporations for some sort of greed here, but the honest truth is that they have been practicing a form of lazy altruism for the last decade, keeping workers on the payroll that long ceased adding values. Businesses are investing heavily in information technology and automation because these new technologies make all sorts of non-creative, repetitive or algorithmic work completely unnecessary. Some might thing that corporations have some sort of responsibility to keep human on the payroll, but these sorts of actions will either result in the death of the business (think GM or Bethlehem Steel), or a massive labor shock at some point down the road.

Every employee needs to be on notice that if their work role no longer adds value compared with what can be automated or outsourced then they need to improve their skills BEFORE their job is eliminated. The time to jump off the ship is before is hits the iceburg, not after. The Government has a role to provide increased education and training opportunities to displaced workers and businesses should be incentivized to invest in their human capitol by giving them the skills they need to be useful in other positions, but at the end of the day we all must take responsibility and ensure that we are serving a useful role in the economy. Times have changed and workers cannot rely on becoming a well compensated "cog" as a long term career path. Using a person as a cog is inefficient and unsustainable. The fact that we currently have too many cogs and not enough machines that need them is the result of a public policy failure, not corporate greed.



Well said. I remember reading early on in the recession that employers were learning that they could maintain profitability with fewer people and that they were likely to keep that in mind as things improved. They certainly have done that.

I don't think the uncertainty aspect can be discounted at all. I've read too many articles wherein business leaders cite the difficult regulatory and legal environment here in the US. Recently, Obama had one of his Potemkin meetings with some business leaders and a man stood up and explained to him that it can take years to get a project built and that it can get shut down at any point along the way due to red tape or other bureaucratic fiat.

Here is an example of this from Paul Otellini, CEO of Intel:

"As a result, he said, 'every business in America has a list of more variables than I've ever seen in my career.' If variables like capital gains taxes and the R&D tax credit are resolved correctly, jobs will stay here, but if politicians make decisions 'the wrong way, people will not invest in the United States. They'll invest elsewhere.'
Take factories. 'I can tell you definitively that it costs $1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States,' Otellini said.

Read more:



My husband actually works in construction for Intel, and one of his buddies has been working for the past 2+ years building a fab in China. What may not be entirely apparent from that stark statement about an extra billion dollars, is that constructing a fab China requires a helluva lot less investment in terms of public safety. Here in the US we require waste water treatment and double-containment for lines that carry dangerous chemicals. We spend extra money to pour concrete to be smooth when cured, instead of using an army of workers to hand-polish it after the fact, inhaling silica particles all the while.

Also, Otellini is talking about building and running some of the most advanced, intricate and expensive factories in the world to begin with. It's not the kind of case you can easily extend and generalize to other kinds of businesses.


Whether the Chinese adhere to our safety or environmental requirements is beside the point. Intel can get a better, quicker return building in China.

Mike B

No, it's exactly the point. If the cost of the job is reducing living standards to that of China, is that cost worth paying? Yeah if you use slave labor and poison the environment of course production costs will be lower, but perhaps there is a way the developed world can prevent a race the the basement with the developing world using import tariffs that apply the cost of environmental degradation and worker safety at the border.


If the workers are the end users of all the products that are sold by the firms, and the workers are being squeezed by earning less, the workers will eventually have to cut back and stop buying certain items. However, more Americans are applying for welfare than ever before because they have all of a sudden discovered that their decrease in pay equals free benefits.

It is determined that a family of 5 would need about 40k a year. If the family only makes 25k, it will qualify for the EIC and child tax credits (refundable and non-taxable) for a total of $8,700. It will also qualify for food stamps in the amount of $800/month or $9600/year. Also, the 3 children will have free lunch at school and qualify for free healthcare. Lunch could be valued at $450/kid and healthcare at $1,500 per kid. That all adds up to $24,150.

So even though workers are earning less, a family of 5 will still have plenty of cash flow to spend money on goods and services that will keep these firms and corporations from losing its customers.


Enter your name

They mean "...the worst since World War II for worker pay and job growth COUNTING JOBS PHYSICALLY IN THE UNITED STATES ONLY", as if this wasn't a global economy, and as if those rising profits in multinational corporations couldn't possibly be associated with rising wages and increased jobs in other countries. (Sorry about the all-caps; I couldn't figure out how else to show the words I was adding.)

I don't understand why we still pretend that a job, if located in Malaysia, and allowing an Asian man to feed, clothe, house, and educate his family of five is nothing, but that the same job, if located in Detroit, and allowing a white or black man to feed, clothe, house, and educate his family of five, is incredibly important. The only people this difference really matters to is the individuals in question, since both of them would like to work at a job with a living wage. On the global scale, it's still one man with a decent job and an income sufficient to care for the basic needs of five humans (and still many more who want a job like that). The nationality and location of the person who holds the job has no moral significance.



lack of unions- duh


Could most of the profits simply be coming from businesses cutting expenses?


Why can't we just give more tax breaks to companies that do hire, instead of saying we will lower corporate tax rates and just hoping they hire.

If you incentivize hiring, more people will be hired. If you incentivize profits more profits will be made, and maybe more hiring will ensue (but only maybe).

Incentivizing hiring is a great way to get more people in the work force and increase total compensation for workers. Also employees who are working are constantly learning about their field and can later add more and more value to the economy. People on unemployment are simply a drag.


You also cannot discount the roles played by corporate greed (CEO pay is still at ridiculous levels) and the decline in our public education system. Many students are graduating from high school and college without the skills necessary to perform high-value jobs, and are therefore being undercut by smarter and cheaper foreign workers.

john king

This is a debt destruction recession/depression. The fact that the Fed & Treasury are trying to spend it to a conclusion does not alter the fact that the causes were excessive debt building excessive capacity. Before wages recover, the debt must be extinguished and the overcapacity eliminated. Each attempt at QEing the problem only extends the time it will take and the cost of it all. The risk is that we don't stop this in time (historically very difficult to do) and we proceed into a major inflation.
The reason that corporations have been able to profit is precisely because they acted quickly to reduce overhead and shut capacity. Notice that those who were slow to move have lagged as well. There is also the cheap money aspect of this. Savers, esp. the elderly, have suffered a loss of income which in turn, dampens demand or consumption from that sector. The money printing has moved food & gas prices higher, further reducing a reluctant consumer to buy. These are small segments of the chain but as the saying goes, a chain is only as strong as its weakest link.



Principles of the projected harm by tobacco companies that would force a state to cover health care costs of users might also be used in the area of outsourced jobs since certainly it is states and the Federal government that are required to do that "disaster recovery" for lost jobs.

Although it hasn't bee applied, there is no reason to conclude that the harm done lies upon any principle other than that applied in the tobacco cases. Where the state must do recovery costs for corporate malfeasance or corporate jeopardy, recovery from the tortfeasors seems just and an only option for states if no other source of remediation is available.

Isn't that the commercial standard used in all cases?
Why should job outsourcing be different?