Grace Ross: Guaranteeing Corporate Profitably

Tuesday, March 12, 2013

Grace Ross, GoLocalWorcester MINDSETTER™

Who am I to say? But if I were primarily focused for my life as a leader in the corporate sector in the US, I would want to have the highest profits predictably for a long time. And I would want to know what kind of policies have created the best economic climate for that goal in the past!

Okay, I know some people hate graphs, but they can be useful. They capture certain information in a way that is often hard to capture in other ways. I’m sharing with you one of my favorite graphs today. It looks at after-tax corporate profits as a share of the national income. I’ve split the graph into two different time periods.

20 years of corporate profits at about 10% of national income

One time period lasted a little over 20 years. Corporate profits bounced around at about 10 percent of overall national income; the percentage bounced up and down a bit, but was pretty consistently 10 percent. Another time period was closer to 30 years long. Then corporate profits mostly dragged along pretty low, but stayed around 7 percent as a share of the national income.

30 years of corporate profits at about 7% of national income

One of these time periods was a period of a lot of unionization. Workers were paid a good share of the profits made by a corporation and as their productivity rose as a workforce, so did their share of the income. The minimum wage was increasing. Regular folks, a large percentage of them, got government help to go to college, even to purchase a home. Standard jobs came to provide pensions and have health benefits covered. Whatever increase there was in standard of living was shared pretty evenly across the boards.

During the other time period reflected, union membership was dropping significantly, the spending power of wages was dropping off, minimum wage was dropping in comparison to purchasing power. Most people came to have private individual retirement accounts; the number of folks whose health coverage was paid for through their work was dropping off. The cost of services were going up and many more were provided by the private sector. The share of increasing profits that were taken home by workers in comparison to corporations holding onto those profits was much less. In fact, workers in general workers did not share in increasing profits in the business in which they worked.

The reason I’m sharing this with you is that I think as a society we’re arriving not at a single crossroads. We are instead reaching a series of choice points over and over again in our economic lives as a nation, a state, even at the community level. Everybody discusses these either as individual choices or as ideological battles. As if large policy impacts are theoretical guesses that we cannot much predict and therefore, ideological conversations can have no real facts to be grounded in.

I have just laid out some facts for you to consider as a businessperson. Given the ideological battle-lines it may be hard to hook together the after-tax profit graphs and the overall economy and income situations that I just described.

Here’s the story.

The 20-year graph is the time period of 1947 to around 1971 or so when after-tax corporate profits were predictable and a bigger share of national income – around 10 percent. That time period corresponds to the time period incomes were increasing across the board fairly equally and while American worker productivity increased at the same solid pace, the increasing profits were shared with the work force. Unionization was increasing and worker protections and related benefits like paid sick leave was becoming the norm. So was having your healthcare coverage completely paid for by your job, having pension funds that would last throughout your retirement. In fact, taxation of the top income bracket (that top slice of money that only the very wealthy receive and therefore are taxed on) was very very high. Most of that money was coming back into the government, but it all led to a very productive economy with high profits and a huge amount of spending from regular people who had a lot more money in their pockets on average. And corporations profited and profited across the board.

The second, 30-year time period started around 1971 to 2001. It represents a really hard time for corporate profits; they were a much lower percentage of the national income. During that time period the number of unionized workers dropped off significantly so did benefits like pensions, employer-paid health coverage, spending power of average wages and the minimum wage. In fact, corporations did badly as they separated off the profits of their workforce’s productivity from the wages they paid.

I know I have angered ideological warriors out there. But I’m a boring woman who only cares about reality.

I don’t understand why corporate leaders on average do not want to recreate the time period with best consistent profits. We have decades of proof that what is good for everybody is good for corporate profits.

Instead we live in a time as if our economic futures are pitted against one another. Bad policy decisions are being made as if the needs of one group such as healthcare being paid for or educational benefits being available for everyone or making sure that everybody has enough food on the table or bring in enough money to be real spending participants in our economy is BAD for business.

But the opposite is true – don’t yell at me – just the facts, ma’am! And they point in the opposite direction for ALL of us from the direction we are going...