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 (ƛ=100)

Now, that's interesting. The red line looks like a sine curve. It suggests a repeating pattern. Now that's interesting.