Employees and Owners

WagesPercentGDPGetting a job is a good thing – it helps you stand on your own feet. Those who don’t have jobs tend to have worse health, higher divorce rates, earlier deaths. But in the US, the world’s strongest economy, those who have jobs have been getting less and less of the pie they have created. The chart shows the strong declining trend, from about 1970 to now, in how much of the pie employees get. If today employees got the 53% of GDP they did in 1970 instead of the 44% they actually get now, they would receive in their pay packets $1,350 billion more than they do get. That is very nearly $10,000 per person employed. That would alter the ability to pay mortgages and look after children.

DividendsPercentGDPWhere has the money gone? Over a third of it has gone to company owners. Dividends, shown in this graph, stayed between 2% and 3% of GDP from the 1940s to the late 1980s. Then the owners pushed them up to nearly 6% of GDP before the crash. In today’s terms, the owners took from each employee an extra $3,600 every year. Today, they still take $2,600 more from each employee than they would have in the 40s, 50s, 60s, 70s or most of the 80s. And it is rising.

How has this happened? The owners have simply been exercising their rights. Employees cooperate voluntarily to create the wealth, but have no right to participate in the wealth they create. The owners can legally take all the wealth for themselves, and in one way and another they have been exercising that right. Private equity leveraged buyouts, for example, are simply the ruthless exercising of the rights of owners, at the expense of everyone else, whether employee, supplier, customer or taxpayer.

It is different in employee-owned companies. The next blog will be about who shared in the profits of two major British retailers: Marks and Spencer, owned mainly by the financial institutions, and the John Lewis Partnership, owned since 1929 by a trust for its employees.

2 thoughts on “Employees and Owners

  1. Hi David
    I watched a video of your presentation recently and was fascinated by the comparison you make between JLP and M&S, very neatly makes the point about wealth leaking out of our local/regional and in many cases national economy. I am also interested in the point you made about the contractual relationship between employer/ee, compared to the more equal relationship in co-ops/ESOP’s.
    As well as my role with CNE and an involvement with the co-op sector for almost 20 years, I’m preparing a PhD proposal on, crudely, job satisfaction in co-ops. I’d like to cite your point about employee/er contracts, is that ok with you: I’m guessing citing a video presentation meets academic rules?!
    Best wishes

  2. Hi Judith. Glad it helped. I think you can cite web presentations: you have to include the date you sourced it. I recommend the work of David Ellerman, who was ten years a World Bank economist, and is the person who originally came up with the insight about the fraudulent nature of the employment contract. His website is http://www.ellerman.org.

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