Some useful tools.
This tool shows where the closest Confederate monuments are to your location, and this tool shows you the closest Home Depot that offers rentals of mini-excavators and demolition equipment. Just saying.
Profits are soaring, but firms spend less on workers: a macroeconomics detour.
The thesis of Thomas Piketty's Capital in the 21st Century was that the share of profits that go to capital* will always increase faster than the share that go to labor—meaning that, the longer capitalism continues, the more unequal it will become. (At least without resets like debt forgiveness, endorsed by David Graeber.)
Automation has drawn significant concern as a driver of this imbalance, but spending on what economists call capital—the useful stuff that helps a firm make its product, like technology—has actually declined. What has increased is profits. Like, a lot.
A new paper draws attention to market power as the greedy sibling of labor and capital. Market power is basically anything that causes a market to diverge from perfect competition, the set of assumptions that underpin your basic high school-level economics; market power is the ability of an individual buyer or seller to influence a commodity's price. Its fullest expression is monopoly power.
Here are a couple of the key takeaways:
- Market power increases with market share; the big guys are more able than before to charge what they want.
- But the effect is most markedly seen in smaller industries.
- "On average, firms charged 67 percent over marginal cost in 2014, compared with 18 percent in 1980."
- As firms can charge more per product, they make a tradeoff with quantity. When they have to produce fewer goods, they need fewer laborers, or pay them less.
- As perfect competition disapperas, productivity gains are less likely to be passed onto other firms and more likely to be pocketed, which increases profits but drags the economy.
*Note that capital here includes both profits and "capital" in the sense used in the new paper, which is really colloquially more like "investments a firm makes in itself."