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Businesses may have achieved record profits over the last 25 years – but workers have not seen it in their salaries.
Bridgewater Associates, the world's largest hedge fund, is managed by billionaire Ray Dalio. He recently released a report on how US companies have seen their revenues increase significantly over their costs over the past two decades. However, as companies see their profit margins increase, the share of profits generated by workers has declined considerably.
In what Bridgewater calls "the most business-friendly environment in history," corporate taxes and workers' bargaining power have declined over the past two decades, as globalization and automation were developing.
Read more: What it is to work in the world's most successful hedge fund, where 30% of new employees do not succeed and those who do are considered "intellectuals of the navy."
According to Bridgewater, the main factor behind the surge in profits, is the decline in the share of workers' profits. Declining unionization among American workers and, to a lesser extent, advances in technology and outsourcing of jobs, are leading to lower wages for workers.
In companies where union membership has fallen, wages have fallen to a level higher than in sectors where union membership has remained intact. Transportation, manufacturing and construction jobs were the hardest hit: the number of union members in these three industries fell 9%, while national wages rose only 1.7% to 2%, 5% since 2000. Jobs in the financial sector have increased the number of union members since 2000 and saw wages increase by almost 3%.
Overall, union members have grown from about a quarter of the workforce to just over 10% today.
"While changes in trade union activity have been less significant in recent years, even the smallest evolutions related to unionization may be related to changes in the amount of wages paid by companies to their employees," the report says.
Dalio does not hesitate to talk about the attacks that workers have been making in recent decades. Earlier this year, Dalio described current levels of income inequality as a "national crisis", warning that these conditions would ultimately weaken the US economy and reduce the country's strength relative to other world leaders.
Among the solutions proposed by Dalio to address the income inequality include an increase in the tax on the rich and increased coordination between the White House, the Federal Reserve and Congress.
The call to raise taxes on the ultra-rich is becoming more and more common. The representative of Alexandria Ocasio-Cortez recently proposed that the marginal income tax rate of more than $ 10 million be raised to 70%, bringing it back to the lowest level of the 1970s. Democratic presidential candidates to raise taxes of the rich are giving satisfaction to Americans.
For this reason, Bridgewater warns that margin growth may not persist because more people recognize that the power of big business is at the expense of worker compensation. The firm predicts increased corporate regulation by the government, and survey data suggests that people are feeling increasing animosity toward globalization and the considerable power of corporations.
"We are undergoing a populist reaction to rising inequality and we are witnessing more and more protectionism," the report says.
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