Can Capitalists Afford Recovery? A Closer Look

Our RWER blog post, ‘Can capitalists afford recovery: A 2018 update’, showed U.S. unemployment to be a highly reliable leading indicator for the capitalist share of domestic income three years later.

An observant commentator, though, suggested otherwise (first comment by jayarava). Although true for much of the postwar period, this association no longer holds, s/he argued. ‘Something changed after the global financial crisis to decouple unemployment from income shares’, s/he posited, pointing to the ‘new power of globalized capital to force down wages even in times of [low] unemployment’ (or rather, that during an expansion, capitalists can raise prices faster than wages, thereby augmenting their income share, which is the conventional view.

This post assesses this claim more closely, by examining the correlation between (1) absolute levels of unemployment and the capitalist share of income, and (2) their respective rates of change.