National Income: Paying Work, Not Capital

Bruce Bartlett

The most disturbing economic trend today is the falling share of national income—the total amount of money earned within the country—going to workers. According to the Bureau of Economic Analysis (BEA), only 61.8 percent of national income went to compensation of employees in 2012, compared with 65.1 percent in 2001. (Historically, about two-thirds of national income has gone to employee compensation, which includes wages and salaries as well as supplements such as pension contributions and health insurance.) Since the vast majority of workers are in the middle class, this means the middle class has been falling behind over the past decade at an alarming pace.

The flip side to this trend is the rising share of national income going to capital—interest, rent, dividends, and other forms of so-called unearned income. Corporate profits have risen to 14.1 percent of national income from 8.5 percent in 2001. (Historically, corporate profits have been about 9 percent of national income.)