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Consider this: > The difference between EBIT growth and sales growth (3.6 percent vs. 2.0 percent) can be attributed to an improvement in profit margins. In ot
by jmyeet 4y ago
Consider this:
> The difference between EBIT growth and sales growth (3.6 percent vs. 2.0 percent) can be attributed to an improvement in profit margins. In other words, costs grew at a slower rate than sales. Some of the improvement in profit margins may have come from sourcing cheaper inputs from abroad, enabled by increased globalization. Moreover, for output produced within the U.S., growth in labor productivity—i.e., real output per hour worked—exceeded real wage growth since the mid-2000s.9 This means that, for a given cost of labor, firms were able to produce more output, which would also likely have contributed to the improvement in profit margins.
Stagnation in real wages goes well beyond the mid-2000s. It starts in the late 1970s [1].
Another way to put the author's thesis is that interest rate costs have gone about as low as they can. Another part is by depressing real wages. The only way for profit growth to continue on this model is to further depress real wages.
Exponential growth cannot continue forever. Consider the metric of net profit per employee [2]. Why is it the employees cannot share in the success of the enterprise that simply cannot exist without them?
We saw this again recently with the averted rail workers strike. Rail companies were freaking out at giving 125,000 "essential" rail workers paid sick leave, the cost of which would've been 3-3.5% of profits.
[1]: https://www.epi.org/publication/charting-wage-stagnation/ https://www.epi.org/publication/charting-wage-stagnation/
[2]: https://tipalti.com/profit-per-employee/ https://tipalti.com/profit-per-employee/
- sooheon 4y agoGreat links. > interest rate costs have gone about as low as they can. Another part is by depressing real wages. The only way for profit growth to continue on this model is to further depress real wages. The third variable is taxes -- we could always reduce sales/income taxes, and replace them with economically efficient taxes like the land value tax.
- jmyeet 4y ago> The third variable is taxes One of the charts in the submission shows that effective corporate tax rate continues to drop (from ~30% to ~15% over the last 2 decades). How much lower do you want it to go? Also, if you replace the method of taxation (eg sales/income to land value use as you suggested), that's still a tax, meaning the only way to lower taxes is to... lower taxes. Changing the method of taxation doesn't inherently do that.
- sooheon 4y ago> How much lower do you want it to go? Well ideally, 0. > Changing the method of taxation doesn't inherently do that. Yes it does. Different taxes have variable economic effects -- a tax on cigarettes is different from a tax on yachts is different from a tax on rent. Some taxes are inherently inefficient and put downward pressure on GDP. Others, like LVT, incentivize economic efficiency and achieve better equality by preventing exploitative rent seeking.
- deleted 4y ago[deleted]
- brundolf 4y agoIt sounds like we could finally see some movement on wage stagnation then, right? If so this seems like a good thing, even if my portfolio takes a hit. Most good for the most people, etc.