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Written by Michael Rizzo
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Tuesday, 25 March 2008 07:05 |
"Capitalists" (which seems to have become a dirty word - if your grandmother owns any mutual funds she is rightly called a capitalist) are accused of exploiting workers in the sense that firm owners/shareholders receive the bulk of the value that its employees create leaving employees with very little of the fruits of their own labor.
One way to assess the validity of this claim is to measure the value of each employee to the output of the firm, and to see whether their wages (actually total compensation, including working conditions) are in line with this value (standard economic theory suggests that these should be roughly equal absent various labor market imperfections). A broad way to understand whether this exploitation is happening is to compare the after-tax profits of all U.S. corporations with the compensation received by all employees of these corporations. Looking at recently released government data you will find that: - after tax corporate profits in 2007 were $1.4 trillion;
- compensation of all employees of U.S. corporations was $8.0 trillion, roughly 57 percent of the $14 trillion in U.S. GDP.
According to this aggregate data, workers received roughly 85 percent of corporate funds available for distribution. While this share is down from 90 percent two decades ago, the large majority of corporate income ends up in the hands of workers, not the exploiting capitalist class. This is not meant to say that we approve of the corporate form of organization as the optimal, or that all firms behave appropriately, rather that in a competitive marketplace where firms must compete for workers, absent special privileges granted to specific firms or industries, it is highly improbable that workers are systematically mistreated by the companies that they work for, at least in regard to compensation.
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