Where do profits and jobs come from? Employment and distribution in the US economy

Lance Taylor and Özlem Ömer

Review of Social Economy, 2020, vol. 78, issue 1, 98-117

Abstract: ‘Meso’ level analysis of 16 producing sectors sheds light on broad forces shaping 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 increases, and negatively to higher real wages. Jobs shifted toward sectors with high employment but slow productivity and real wage growth, contributing to an overall decrease in the wage share. 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 the total profits. Growth of remaining 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 operate against employment and real wages in labor markets.

Date: 2020
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DOI: 10.1080/00346764.2019.1672883

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