Wednesday, October 28, 2015

GDI: Point of interest


I took the highest "Shares of GDI" series for "Compensation of employees" and divided it by the highest "Shares of GDI" series for "Corporate profits". The resulting graph runs from 1929 to 2014 and it all stays between 0 and 20 except during the Great Depression, when it drops down around -180, then bounces back up.

I chopped off those early years to get a better look at the rest of it:

Graph #1
Oh...

This is employee compensation as a multiple of corporate profits. In the 1950s and early 1960s -- the "Golden Age" -- compensation ran low, at about five times the profit level. Then, during the "Great Inflation" compensation increased, relative to profits. In the 1980s, compensation ran high, at about eight times the profit level. Since the early 1990s, compensation declined relative to profits, and volatility has been greater.

Graph #2: Same as Graph #1, with Trend Lines Eyeballed In
Not what you expected, is it.

Employee compensation was low in the good years. It was high in the Reagan years.

Know what I think? I think there must be more to the story than compensation and profits.


I wanted to check my trend guesstimates, so I recreated the graph with a Hodrick-Prescott calculation:

Graph #3: Data from Graph #1, plus a Hodrick-Prescott Trend (∆õ=100)
Now, that's interesting. The red line looks like a sine curve. It suggests a repeating pattern. Now that's interesting.

4 comments:

Jazzbumpa said...

Art -

This is very hard to square with labor's share.

https://research.stlouisfed.org/fred2/graph/?g=2iA4

Also appears to be contra my series of AB posts from 2012.

http://angrybearblog.com/2012/02/where-has-all-money-gone-pt-iv.html

Cheers!
JzB

The Arthurian said...

Jazz
?
I've showed pretty much all the GDI components I've looked at. I don't know why they came out as they did. Check my arithmetic.

GDI is pretty close to GDP so the "shares of GDI" should look the same as they would with GDP as the denominator.

I like the "labor share" graph. But it is not clear to me: labor share OF WHAT?

Dunno why the differences.

jim said...

"Employee compensation was low in the good years. It was high in the Reagan years."

It looks like employee share was rising relative to corporate share until it hit the Reagan years. Then it reversed.

It has always been my impression that (contrary to what the media is always telling us) the inflation of the 70's was good for wage earners and the lack of inflation of the 90's was bad for wage earners. That
chart seems to confirm that.

The Arthurian said...

It has always been my impression that ... the inflation of the 70's was good for wage earners and the lack of inflation of the 90's was bad for wage earners. That chart seems to confirm that.

Sounds right to me.

On that graph, it seems to me that high is better than low, but low and rising might be better than high and falling.