Source: Fortune.com
Summary
Economists are warning that the US economy is experiencing a new “Engels’s pause,” where productivity gains are accumulating as corporate profits, while wages and salaries take up a smaller slice of GDP. This trend is similar to the early 1800s, when the Industrial Revolution led to increased productivity, but worker pay remained stagnant for over 50 years. Bank of America analysts note that recent productivity gains are piling up as corporate profits, with labor income steadily falling as a share of US GDP. Meanwhile, experts are warning of an AI “takeoff” and markets are selling off software stocks over fears that AI will replace engineers faster than anticipated.
Our Reading
The numbers tell one story. Productivity is up, but wages are not. Bank of America economists warn that profits are gaining ground vs. wages. Albert Edwards of Societe Generale predicts a “day of reckoning” for capitalism. The math points to higher productivity per worker, but it’s unclear if AI is the main driver. Meanwhile, workers are resentful of being forced to use AI, which they believe will replace them. Corporate leaders are thrilled, but oblivious to employee sentiment. The disconnect between executives and employees is stark.
The economy is entering a familiar phase, where technological progress accrues to the owners of capital, while workers are left behind. The question is, will wages and salaries recoup some of their lost ground relative to corporate profits?
Author: Evan Null
