Top Leaderboard, Site wide
Truthdig: Drilling Beneath the Headlines
July 26, 2017 Disclaimer: Please read.

Statements and opinions expressed in articles are those of the authors, not Truthdig. Truthdig takes no responsibility for such statements or opinions.

The Unwomanly Face of War

Truthdig Bazaar more items

Email this item Print this item

Were Top Corporate Executives Really Hogging Workers’ Wages?

Posted on Sep 18, 2014

Photo by jbelluch (CC BY-ND 2.0)

By Andrew Kliman

(Page 5)


1. Thomas Piketty, Capital in the Twenty-First Century, p. 302, p. 315.

2. I will use the rather stilted terms “employee” and “compensation,” rather than ”worker” and “wages,” partly to avoid entering into controversy over whether all employees are “real” workers, and partly to emphasize that I am referring to wages and benefits rather than wages alone. 

3. Thomas Piketty, Capital in the Twenty-First Century, p. 302.

4. These percentages refer to income including capital gains. The percentages for income excluding capital gains were very similar.


Square, Site wide, Desktop


Square, Site wide, Mobile
5. Piketty’s 70 percent figure seems to be just a mistake. He may be referring to another statistic in BC&H, pertaining to these three groups’ combined contribution to the rise in the share of income captured by “the 0.1%.”

6. Thomas Piketty, Capital in the Twenty-First Century, p. 302.

7. Moreover, this 88 percent figure underestimates the owner-managers’ business income, since some of the remaining 12 percent consists of labor income that their spouses and dependents received. Consider, for example, an owner-manager who brings home $730,000 in business income and has a wife who works as an accountant, doctor, or lawyer and receives a salary of $100,000. Although 12 percent of this combined income is labor income, the owner-manager is quite unlike Piketty’s supermanagers, since he paid himself no salary at all.

8. As a share of the noncorporate business sector’s national income, employee compensation rose from 33.9% in 1979 to 37.2% in 2005, while business income (“proprietors’ income”) fell from 45.6% to 44.3% and net interest payments fell from 11.2% to 8.1%. The data are published in National Income and Product Account (NIPA) Table 1.13, lines 10, 11, 14, and 16.

9. See Steven N. Kaplan and Joshua Rauh, “Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?,” 2009, p. 28.

10. My references to BC&H’s data above drew on the published version; from this point forward, I refer exclusively to their unpublished data.

11. Much of the gain in the owner-managers’ share at the expense of the salaried managers’ share is a consequence of a 1986 law that reduced the top tax rate on individual income below the top rate for corporate income. This change eliminated owner-managers’ incentive to incorporate their businesses and report their income as employee compensation instead of as business income.

12. The corresponding figure for the top 0.1% income group is 12 percent.

13. Business-sector Net Domestic Product is reported in NIPA Table 1.9.5 (line 2). The incomes of salaried managers in the top 0.1 and top 1% are their shares of income (as reported in BC&H’s unpublished data) times total tax-return income, reported in Table A0, col. 4 of the updated spreadsheet file accompanying Thomas Piketty and Emmanuel Saez’s paper, “Income Inequality in the United States, 1913-1998.” My second (more realistic) set of estimates uses data in Table A7 of Piketty and Saez’s file to compute the wage-and-salary shares of wage/salary, dividend, and interest income of the top 0.1% and top 1% income groups. My estimate of salaried supermanagers’ employee compensation is the product of this wage-and-salary share and their total income.

14. For the whole top 1% group, wages and salaries, as a share of wages and salaries plus dividends plus interest, were 74.2% in 1979 and 82.3% in 2005. If we assume that the corresponding shares for salaried managers in the top 1% were 66.6% in 1979 and 89.9% in 2005, the rise in their share of business-sector Net Domestic Product would still fall short of one percentage point. These latter percentages imply that, as shares of business-sector Net Domestic Product, compensation of salaried supermanagers in “the 1%” rose more than twice as rapidly (101%) as their total income (49%).

15. The graph is based on my second (more realistic) estimate of top salaried managers’ compensation discussed above. My estimate of other employees’ compensation is total compensation of business-sector employees, reported in NIPA Table 1.13 (sum of lines 4 and 11) minus the estimated compensation of salaried managers in “the 1%.” I divided the difference by business-sector Net Domestic Product, reported in NIPA Table 1.9.5 (line 2) to obtain the other employees’ share of the product. (BC&H report income shares only for 1979, 1993, 1997, 1999, and 2001–5; linear interpolation was used to estimate income shares of salaried managers in intervening years.)

16. These numbers are based on my estimates of the number of employees in the business-sector (103.9 million) and the average number of hours they worked in 2005 (1711.2). The estimates are based on NIPA data on employment and hours in private industries and government enterprises, and on an estimate of nonprofit-sector employment reported in Table 2 of a Congressional Research Service study. Business-sector employment is private-industry employment plus employment in government enterprises minus employment in the nonprofit sector.

17. To obtain nominal figures, I multiplied the real median and average hourly compensation figures reported in Mishel and Gee’s Appendix Table A1 (cols. 2 and 3, respectively) by the implicit price index reported in col. 9 of their Appendix Table A3.

New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.

Join the conversation

Load Comments
Right Top, Site wide - Care2
Right Skyscraper, Site Wide
Right Internal Skyscraper, Site wide