Capital vs. Labor in the US and Great Britain


In the United States, the labor share of income has been declining steadily since about 2000. The same was true in Great Britain—until the Great Recession hit. Since 2010, the labor share of income has gone down 5 percent in the US and gone up 5 percent in the UK.

Why? Another way of describing what happened is that labor productivity continued rising in the US but declined in the UK. When labor is more productive, you need less of it, and that’s what happened here. But again: why? Jason Douglas passes along some speculation:

Ben Broadbent, the Bank of England’s next deputy governor for monetary policy, showed students at the London School of Economics an interesting chart in a speech he gave back in January that shows that wages as a share of national income actually rose inBritain in the past few years, a period of deep recession and subsequent stagnation that Britain is only now climbing out of. Corporate profits’ share of the cake declined. In the U.S., the opposite happened.

Why might this divergence have occurred?….He challenged the students in his audience to come up with an explanation as to why the two economies had such a different experience. One possible explanation, according to economists, is that companies in the U.S. pruned their workforces more severely when the downturn hit than British firms did. British bosses, faced with higher layoff costs and wary of losing skilled staff as they did in previous recessions, decided to keep as many workers on as they could and take the hit instead to their bottom line.

But that still doesn’t answer the question. Why were British bosses wary of losing skilled staff but US bosses weren’t? It’s true that labor markets are more regulated in Britain than they are here, which makes it more expensive to lay off workers, but they aren’t a lot more regulated. In previous recessions and recoveries, Britain and the US followed almost identical trajectories.

Perhaps a more useful framework for analyzing this is to look instead at capital shares, which are the mirror image of labor shares. This means that in the US, the capital share of income has gone up, while in the UK it’s gone down. Even if layoffs and wage growth followed similar paths in both countries, that could happen if capital returns recovered faster on this side of the Atlantic. And that’s plausible: In the US, the financial sector has fully recovered from the recession and is now as big and profitable as it was in the mid-aughts. In the UK, the financial sector was treated more sternly and still hasn’t fully recovered from the recession.

This may be about to change, as US banks run into headwinds and Dodd-Frank regulations start to bite. And in any case, this is mostly just a guess on my part. Still, it strikes me as a potentially more fruitful lens to look through. Thoughts welcome.

WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

payment methods

WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate