One statistic in an Associated Press story helps explain why the U.S. economy lolls in the doldrums: wages and benefits have sunk to 57.5 percent of GDP, down from a longstanding 64 percent while “a big chunk of the economy’s gains has gone to investors in the form of higher corporate profits.”
“Corporation” is a loaded word. It describes the increasingly rare private practice physician who attempts to shield his or her home from loss in the event of malpractice lawsuit or the auto dealers who are the big wheels in local chambers of commerce.
But these are not the business owners described in the AP statistic. As big as they may seem to the ordinary wage earner, these local economic leaders are small fries in the greater scheme of things.
Here’s another fact to put things in perspective. The Small Business Administration tells us that the firms in its universe comprise 99.7 percent of all employers. Taken as a whole, small businesses employ just over half of all U.S. private sector workers and have created nearly two-thirds of all the new jobs over the last 15 years.
But think about the flip side. A handful of huge companies — comprising just 0.3 percent of all U.S. firms — employ the other half of the workforce. Moreover these global players and household brands also pay the best wages and benefits. As the SBA reports, the small firms noted above employ just over half of all workers but pay just 44 percent of private sector wages.
Global companies are booming because they can shift their focus more easily to the booming parts of the world, like China, and/or take advantage of low cost labor, materials and manufacturing. They also have such a huge impact that their lobbyists can pressure Congress for all sorts of help. No wonder their profits soar and their investors and employees do well.
Meanwhile the Main Street economy, thousands upon thousands of small employers and millions upon millions workers, continues to suffer. Most local businesses serve only local markets. Many of their customers cannot escape the incredible downward wage pressure captured in the AP statistic.
Remember that small firms have been the engine of job creation. Main Street is hurtin’ for certain. And as long as it is, the job market will remain stalled, no matter how well global companies perform.