Recent data indicate that wages and salaries as a share of national income have fallen to the lowest level since 1948—a time when the government began to collect the data.
During the third quarter of 2011, wage and salary compensation represented 49.4 percent of national income.
Meanwhile, Bloomberg reports that the profit margins of U.S. companies are at the highest level in 40 years.
The profit margins of non-financial companies in the United States reached 15 percent during the third quarter of 2011. This is the highest level since 1969.
In addition to the glaringly obvious inverse correlation between the returns to capital and the returns to labor, the profit margin data is considered by some asset managers to be an indication of peak and possibly unsustainable levels of profitability among U.S. corporations.
Jeremy Grantham of GMO believes that equity prices will likely suffer when profit margins revert to their historic averages.
Source: Bloomberg
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