With all of the negative economic news you may not realize that the American economy continues to generate wealth and profits. The following slideshow takes a look at why this surplus is not being invested to stimulate demand or create jobs.

1. For Richer or Poorer: Concentrating Wealth
in the American Economy
Jerry Paytas, Ph.D.

2. Every day we hear about how taxes,
regulations and Obamacare are killing
jobs and stifling growth in the American
economy. The prescription is to cut
government, stop whining about the
winners and pull up your own bootstraps!
GOVERNMENT IS KILLING
JOBS

3. If regulation kills jobs, then how do you
explain the growth of a heavily regulated
industry life Life Sciences?
Life Science Jobs Life Science Wages ($B)
14,500,000 $800
14,000,000 $700
13,500,000 $600
13,000,000 $500
12,500,000 $400
12,000,000 $300
11,500,000 $200
11,000,000 $100
10,500,000 $-
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

4. So why were 3.5 million domestic jobs
were lost from 2005-2010 – two of the top
three declines since 1945!
3rd largest percentage
2nd largest absolute loss loss
Domestic Employment, 1945 Percent Change
- 2010 20.0%
160,000,000
15.0%
140,000,000
2
120,000,000
10.0%
100,000,000 1
80,000,000
5.0%
60,000,000 2 1 3
40,000,000 3 0.0%
20,000,000
- -5.0%
1945-1950
1950-1955
1955-1960
1960-1965
1965-1970
1970-1975
1975-1980
1980-1985
1985-1990
1990-1995
1995-2000
2000-2005
2005-2010
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
-10.0%
Source: National Income and Product Source: National Income and Product
Acconts, Bureau of Economic Analysis Acconts, Bureau of Economic Analysis

5. Two of the largest employment reversals
in the past 65 years have occurred in the
past 20 years? Why are we getting such
severe events with increasing frequency?
THERE MUST BE MORE
GOING ON

6. 1950 to 1990 we had a run of job growth
interrupted by only minor reversals
Domestic Employment, 1945 - 2010
160,000,000
140,000,000
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
-
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Source: National Income and Product Acconts, Bureau of Economic Analysis

7. The profits of American corporations, even
after we adjust for inflation, have continued
to rise, even now while jobs are vanishing
Adjusted Domestic Profits ($1 M) Jobs (1,000)
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
1945 1955 1965 1975 1985 1995 2005 2010 2011
Source: National Income and Product Accounts, Bureau of Economic Analysis

8. The gap becomes even more stark if we
index profits and jobs to 1945 levels
Domestic Profit (Adjusted) Domestic Employment
7.00
6.00
5.00
Index (1945 = 1.0)
4.00
3.00
2.00
1.00
-
1945 1955 1965 1975 1985 1995 2005 2010 2011Q2

9. U.S. Corporations are using some of the
money to create jobs outside the U.S.
Source: http://online.wsj.com/article/SB10001424052970203710704577052220096932832.html

10. Companies are also sitting on record amounts
of cash. Microsoft held $53 billion in cash in
June 2011, up from $21 billion in December
2008.
Money has to flow to stimulate demand, but
when it is stuffed in corporate mattresses it
reduces the liquidity that oils the gears of our
economy until the engine locks up
WHAT COULD YOU DO
WITH $53 BILLION

11. Profits are not creating jobs for Americans

12. If profits have continued to rise, despite
taxes, regulations and Obamacare… and
U.S. Corporations added jobs in high
tax, high regulation nations like France
and Germany, why can’t they invest here?
WHERE HAS THE MONEY
GONE?

13. It has gone to the 1%. The only group to
increase its share of Market Income.
45.0
40.0
35.0
30.0
25.0
20.0 Share of Market Income 1979
Share of Market Income 2007
15.0
10.0
5.0
0.0
Lowest Quintile Second Quintile Middle Quintile Fourth Quintile 81st - 99th Top 1 Percent
Percentiles
Source: Office of Management and Budget

14. But isn’t it true that the rich pay almost
40% of all federal taxes? If we cut
taxes, then we should have more
investment that creates jobs.
REDISTRIBUTION
PREVENTS WEALTH FROM
CREATING JOBS

15. But after taxes and transfers, the richest
20 percent (actually the top 1%) still got all
the marbles!
Adjusted Income 1979-2007
12.0
10.0
8.0
6.0
4.0 Adjusted Income 1979-2007
2.0
0.0
Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Fifth Quintile
-2.0
-4.0

16. When we look at income distribution
between the top and bottom, we can’t
forget that population growth changes
how many people are affected -
QUINTILES DISTORT

17. Each quintile added 15.3 million people
from 1979 to 2007, but only one increased
its share of income
Income Change Relative to Population Change
0.70
0.60
0.50
0.40
0.30
0.20
0.10
-
Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Fifth Quintile
(0.10)
(0.20)
(0.30)

18. Severe inequality kills jobs. When wealth
is highly concentrated, the market for
goods and services dries up. $1M spent
on luxury goods has the same impact on
GDP as $1M spent on necessities, but the
job impacts are very different.
GDP DOES NOT EQUAL
JOBS

19. The Maybach Landaulet model costs $1
million

20. Ford employs more than 30 people for
every car sold versus less than 12 for
luxury maker Mercedes-Benz, which makes
the Maybach
Jobs per Car
Mercedes-Benz sold 1.1M vehicles
with 96,000 employees in 2010
Mercedes-Benz $1M to buy 40
Fords sustains 100
times the jobs of
Ford sold 5M vehicles with one Maybach
164,000 employees in 2010
Ford
0 5 10 15 20 25 30 35

21. Productivity gains reduce employment only
in the short term. But shifting production
from mass market goods to luxury items
might not affect GDP but it does impact jobs.
The question is whether the concentration of
wealth has short-circuited the link between
rising productivity and job creation….
YOU CAN BE TOO RICH!