Thursday, June 24, 2010

Components of Corporate Cost

The previous post looked at "wages and salaries" plus "compensation of officers." But I could find those numbers for only a few years. So the previous graph gives no feel for changes that have taken place over the years.

This graph rectifies that by using "employee compensation" numbers. Now we can see 60-year trends. But these numbers are substantially higher. (I suppose they include health benefits and such.) So we're not talking 12% anymore.

Here we see "employee compensation" fall from 24.56% in 1948 to 18.34% in 2007, a decline of more than 6 percentage points. Over the same period, corporate interest costs climb from less than 1% of deductions in 1948 to 8.6% in 2007. That's an increase of more than 7.5% percentage points, 7½% of corporate costs.

The post-war trends show that corporate interest costs increased and employee compensation fell. But what happened with corporate spending is only part of the problem of rising interest cost in business, in government, and in our personal lives.

This is only a ballpark number, but if we take corporate deductions for 2007 ($26.97 trillion) and reduce interest costs enough to boost employee compensation from 18.34% to 24.56% like it was in 1948, employee compensation increases from $4.9 trillion to $6.6 trillion. That's an increase of more than one-third, in your paycheck and mine.

And it doesn't increase corporate costs a penny.

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