Corporate profits have soared in recent decades, while wages for the average worker have not fared nearly as well. A new study sheds some light on why that is happening: declining unionization.

While some economists have posited that this trend is thanks to a rise in computerization, which boosted productivity and reduced the need for actual workers, researcher Tali Kristal contends that it is more closely related to falling union membership. She found that from 1979 to 2007, workers’ share of national income decreased by six percentage points. The money not spent on wages went to corporate profits instead.

But this trend didn’t occur evenly across the economy. The areas that saw the largest decline in labor’s share of income were in those that at one point were highly unionized: construction, manufacturing, and transportation. “By contrast,” she said, “in the lightly unionized industries of trade, finance, and services, workers’ share stayed relatively constant for even increased.” This suggests that falling levels of unionization, which she says “led to the erosion of rank-and-file workers’ bargaining power,” are to blame.

Corporate profits have rebounded particularly well after the recession. They have grown at an annualized rate of about 20 percent since the end of 2008 and hit record highs in the second half of 2012, reaching 14.2 percent of national income, the largest share since 1950.

Yet incomes have not kept up. Wages as a percentage of the economy hit have hit an all-time low. Disposable income only grew by 1.4 percent since the end of 2008. Those at the bottom of the economic ladder have suffered the most: income for the bottom 90 percent of Americans rose just $59 from 1966 to 2011, adjusted for inflation.

Unionization levels have long been on a serious downward trajectory. Membership dropped to the lowest level since the Great Depression last year. This decline also closely tracks the rise in income inequality and the middle class’s falling share of national income.

Income inequality around the world increased more during the financial crisis that it did in the previous 12 years, according to new data from the Organisation for Economic Cooperation and Development (OECD) released on Wednesday. The United States has one of the largest gaps along with Chile, Mexico, Turkey, and Israel. The top 10 percent of the income scale fared better than the poorest 10 percent in 21 out of 33 countries.

In the United States, the top 10 percent of the income distribution had 15.9 times the income at of the bottom 10 percent in 2010, compared to 9.8 times for the OECD on the whole. The U.S. also has a higher Gini coefficient – a measurement of a country’s income inequality – and a higher share of the population living on less than half the median income.

But there is a silver lining: The numbers would look much worse without social spending. Nearly a third of the country’s population would be living on less than half of the median income without the social safety net, but taking it into account drops that number to 17.4 percent. The Gini coefficient also falls significantly, proving that social spending is doing a lot to bring down income inequality.

That could change as the U.S. continues to cut government spending. The report “warns that further social spending cuts in OECD countries risk causing greater inequality and poverty in the years ahead.” The U.S. is set to cut $1.5 trillion in spending over the next decade, and new CBO numbers show that the deficit has dramatically dropped thanks in part to falling public spending.

The Great Recession fueled an explosion in income inequality and the economic recovery has carried on the trend. The numbers themselves are staggering, but the causes are also important. A new report from the Pew Research Center finds that not only did the wealth gap between the bottom and the top of the income ladder expand during the first two years of the recovery, but we can chalk most of it up to the improvement in the stock market during that time:

During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%, according to a Pew Research Center analysis of newly released Census Bureau data. [...]

These wide variances were driven by the fact that the stock and bond market rallied during the 2009 to 2011 period while the housing market remained flat.

Affluent households typically have their assets concentrated in stocks and other financial holdings, while less affluent households typically have their wealth more heavily concentrated in the value of their home.

From the end of the recession in 2009 through 2011 (the last year for which Census Bureau wealth data are available), the 8 million households in the U.S. with a net worth above $836,033 saw their aggregate wealth rise by an estimated $5.6 trillion, while the 111 million households with a net worth at or below that level saw their aggregate wealth decline by an estimated $0.6 trillion.

This astronomical rise in wealth at the top coincides with a frothy stock market. During the same two years, the S&P 500 rose by 34 percent. Meanwhile, home prices kept falling: The S&P/Case-Shiller home price index fell by 5 percent during that time.

The report notes, “The different performance of financial asset and housing markets from 2009 to 2011 explains virtually all of the variances in the trajectories of wealth holdings among affluent and less affluent households during this period.” That’s because the wealthy hold more stocks and bonds and less of their wealth is tied to home price. Households with a net worth above $500,000 have 65 percent of their wealth in financial holdings. Lower income households, on the other hand, have half of their wealth in their home and just a third of comes from the stock market.

This trend isn’t unique to the recession, however. Income inequality has been growing over the past 30 years thanks to skyrocketing executive pay, stagnating pay for workers, the growth in low-wage jobs, and a tax code that often benefits the well off.

The top 10 percent of Americans have experienced rapid income growth over the last 40 years, but the bottom 90 percent haven’t been so lucky. In fact, average income rose just $59 from 1966 to 2011 for the bottom 90 percent once those incomes were adjusted for inflation.

That’s according to a new study of tax data from David Cay Johnston, who won a Pulitzer Prize for his writing about tax policy. While the bottom 90 percent’s incomes rose just $59, the top 10 percent fared much better, he found:

In 2011 the average AGI of the vast majority fell to $30,437 per taxpayer, its lowest level since 1966 when measured in 2011 dollars. The vast majority averaged a mere $59 more in 2011 than in 1966. For the top 10 percent, by the same measures, average income rose by $116,071 to $254,864, an increase of 84 percent over 1966.

The difference in those gains has reduced the share of income the bottom 90 percent holds as well. That segment held two-thirds of all household income in 1966 but just 51.8 percent in 2011, Cay Johnston found. Other studies have had similar results. One study found that pay for chief executives increased 127 times faster than worker pay over the last 30 years, and official data has shown worker wages stagnating since the 1970s. That has led to a sharp increase in American income inequality, which now rivals rates from countries like the Ivory Coast and Pakistan.

The biggest driver in that disparity, Cay Johnston wrote, was not that the rich were working harder, “but the shift of income from labor to capital and changes in federal income, gift, and estate tax rules.” Indeed, the estate tax has been eased over recent decades and federal income taxes have become more favorable to the wealthy thanks to breaks for investment income. A recent study, in fact, found that the capital gains tax cut, which benefits the wealthy but does virtually nothing for everyone else, was “by far” the biggest driver in the growth of American income inequality. (HT: Huffington Post)

The stock market climbed to new heights today, clearing 14,200 for the first time in its history. The previous high of 14,164 was reached on October 9, 2007, in the days before the financial crisis. In this year alone, the stock market is up 7.8 percent.

But while stocks are achieving new highs, precious little benefit is trickling down to workers. This chart shows workers’ wages as a percentage of the economy, which are hovering near record lows:

As Quartz’s Matt Phillips put it, “in many ways Americans are still sucking wind after the gut punch they suffered in 2008.” In fact, the richest 1 percent of Americans have captured 121 percent of the income gains achieved during the current recovery, meaning everyone else has actually lost ground in terms of income since the economy bottomed out.

Corporate profits hit record highs in the second half of 2012, but that prosperity hasn’t led to the creation of jobs, since America’s biggest firms are sitting on stocks of cash instead of investing them back into the economy.

At the same time, wages hit record lows, and corporate earnings are rising nearly 20 times faster than disposable incomes, the New York Times reports:

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

From 2009 to 2011, 88 percent of national income growth went to corporate profits while just one percent went to workers’ wages, and hourly earnings for workers actually fell over that time. And while they aren’t investing in job growth, corporations are also paying taxes at a rate that hit a 40-year low in 2011.

During the Great Recession, the wealth gap between whites and African-Americans nearly doubled, leaving white with nearly 22 times as much in household wealth. According to a new study from Brandeis University’s Institute on Assets and Social Policy, this merely exacerbated a much longer trend during which the wealth of whites exploded while that of African-Americans stagnated:

In 2009, a representative survey of American households revealed that the median wealth of white families was $113,149 compared with $6,325 for Latino families and $5,677 for black families.

Looking at the same set of families over a 25-year period (1984-2009), our research offers key insight into how policy and the real, lived-experience of families in schools, communities, and at work affect wealth accumulation. Tracing the same households during that period, the total wealth gap between white and African-American families nearly triples, increasing from $85,000 in 1984 to $236,500 in 2009.

The report shows that the disparity is driven by “policy and the configuration of both opportunities and barriers in workplaces, schools, and communities that reinforce deeply entrenched racial dynamics in how wealth is accumulated.” For instance, whites are far more likely to receive familial assistance when buying a home (due to previously accumulated wealth), therefore allowing them to purchase a home earlier and hold it for longer. They are also more likely to live in a place where home equity rises more quickly. The same familial advantages allow whites to graduate college with far less student debt. All of this compounds on an already existing disparity, making it that much harder for African-Americans to catch up.

Last year, economist Emmanuel Saez estimated that the richest 1 percent of the U.S. captured a whopping 93 percent of the income gains in 2010, as the U.S. was emerging from the Great Recession. Saez is now back with updated numbers from 2011, and they make the picture look even grimmer:

From 2009 to 2011, average real income per family grew modestly by 1.7% (Table 1) but the gains were very uneven. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery. From 2009 to 2010, top 1% grew fast and then stagnated from 2010 to 2011. Bottom 99% stagnated both from 2009 to 2010 and from 2010 to 2011.

How is it possible for the 1 percent to capture more than all of the nation’s income gains? The number is due to the fact that those at the bottom saw their incomes drop. As Timothy Noah explained in the New Republic, “the one percent didn’t just gobble up all of the recovery during 2010 and 2011; it put the 99 percent back into recession.”

Saez added that “In 2012, top 1% income will likely surge, due to booming stock-prices, as well as re-timing of income to avoid the higher 2013 top tax rates…This suggests that the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s.”

Wages last year plummeted to an all-time low as a percentage of the economy, even as corporate profits rocketed to new highs. This means that corporations have been able to squeeze more and more productivity out of workers, without rewarding them for their efforts.

According to a new report from the Economic Policy Institute, this phenomenon has been a long time coming. In fact, workers have seen precious little gain from increased hours and productivity since 1979:

Workers have been offering more to the economy and the labor market, and what they have received in return — particularly in the form of real hourly wages — has been very disappointing. This trend is particularly evident when considering that the majority of workers — especially those in the bottom 60 percent of the wage distribution — increased their work hours substantially between 1979 and 2007, the last year before the current recession. However, during this period (excluding a brief interlude of strong economic growth between 1995 and 2000), real (i.e., inflation-adjusted) hourly wages of the bottom 60 percent grew modestly — ranging from an actual decline for the bottom fifth to annual growth of about 0.25 percent for the middle fifth. This growth is far less than the increase in economy-wide productivity over that time.

As EPI noted, “In contrast, those at the top fared much better: The stock market grew strongly, CEO compensation grew twice as fast as the stock market, [and] wealth grew for the top 1.0 percent.” In the still-fragile economic recovery, the bottom 90 percent of workers have seen their wages fall, while “the top 1.0 percent of wage earners are likely to quickly recoup all of the ground lost in the downturn.”