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

Author

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  • Lance Taylor
  • Özlem Ömer

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.

Suggested Citation

  • Lance Taylor & Özlem Ömer, 2020. "Where do profits and jobs come from? Employment and distribution in the US economy," Review of Social Economy, Taylor & Francis Journals, vol. 78(1), pages 98-117, January.
    • Handle: RePEc:taf:rsocec:v:78:y:2020:i:1:p:98-117
    DOI: 10.1080/00346764.2019.1672883
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    Cited by:

    1. Lance Taylor & Özlem Ömer, 2019. "Race to the Bottom: Low Productivity, Market Power, and Lagging Wages," International Journal of Political Economy, Taylor & Francis Journals, vol. 48(1), pages 1-20, January.
    2. Codrina Rada & Ansel Schiavone & Rudiger von Arnim, 2022. "Goodwin, Baumol & Lewis: How structural change can lead to inequality and stagnation," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1070-1093, November.
    3. Ivan Mendieta‐Muñoz & Codrina Rada & Rudi von Arnim, 2021. "The Decline of the US Labor Share Across Sectors," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(3), pages 732-758, September.
    4. Jose Barrales‐Ruiz & Ivan Mendieta‐Muñoz & Codrina Rada & Daniele Tavani & Rudiger von Arnim, 2022. "The distributive cycle: Evidence and current debates," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 468-503, April.
    5. Codrina Rada & Ansel Shiavone & Rudiger von Arnim, 2024. "An exploration of neo-Goodwinian theory of cyclical growth," Working Papers 2403, New School for Social Research, Department of Economics.
    6. Codrina Rada, Ansel Schiavone, Rudiger von Arnim, 2021. "Goodwin, Baumol & Lewis: How structural change can lead to inequality and stagnation," Working Paper Series, Department of Economics, University of Utah 2021_04, University of Utah, Department of Economics.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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