Where Do Profits and Jobs Come From? Employment and Distribution in the US Economy

Lance Taylor and Ozlem Omer ()

No 72, Working Papers Series from Institute for New Economic Thinking

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 (search for similar items in EconPapers)
JEL-codes: D31 D33 E12 E2 E24 J40 L11 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-04-08
New Economics Papers: this item is included in nep-mac and nep-pke
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Where do profits and jobs come from? Employment and distribution in the US economy (2020)
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