The document summarizes issues facing capitalism today including jobs, wages, income inequality, and corporate short-termism. It finds that while the jobs picture has been strong, labor force participation is falling. Wages have barely risen despite rising productivity and corporate profits reaching near record highs. This is largely due to globalization, technology, tax policy, declining unionization, and "winners-take-all" labor markets. The U.S. also has the highest income inequality among developed nations and does less to redistribute income. However, business spending and R&D are better than perceived and firms that invest more in R&D see higher stock performance, suggesting corporations may not be as short-term as often believed.

1. Steven Rattner
June 30, 2016
Is Capitalism Working?
1

2. Agenda
 Jobs
 Wages
 Income Inequality
 Corporate Short-termism
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3. Jobs
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4. Jobs Picture Has Been Strong
Source: BLS
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5. But Labor Force Participation Is Falling
Source: BLS, CEA
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6. The Missing Prime-Age Men
Source: OECD
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7. Less Educated More Likely To Drop Out
Source: CEA, BLS
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8. Gig Economy Is Growing But Still Small
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Source: JP Morgan Chase Institute, BLS
…But Barely Register Among Self-EmployedGig Workers Have Been Increasing…

9. Wages
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10. Wages Should Track Productivity
Note: Data are for average hourly compensation of production/nonsupervisory workers in the
private sector and net productivity of the total economy.
Source: EPI
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11. Incomes Now Appear To Be Rising
Source: Sentier Research
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$56,853

12. But Wage Data Confusing
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Note: All figures are for production workers only and are adjusted for inflation.
Source: BLS

13. Corporate Profits Near Records
Source: Standard and Poor’s, Goldman Sachs
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9.5%

14. Why Have Corporate Profits Risen While
Wages Have Mostly Stagnated?
 Principal causes:
 Globalization
 Technology
 Secondary causes:
 Tax policy
 Declining unionization
 “Winners-take-all” labor market
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15. Income Inequality
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16. US Leads in Income Inequality
*2013 or latest available. Gini coefficients are post taxes and transfers.
Source: OECD
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17. US Does Less to Redistribute Income
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Note: Data is for households with people under 60 only.
Source: Janet Gornick, Luxembourg Income Study 2013

18. Are Companies Too Short-Term?
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19. Capital Returns Are Rising
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Note: Figures are for S&P 500 companies only.
Source: Carlyle Group, Greg IP, WSJ

20. Business Spending Better Than Perception
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Source: BEA

21. Business R&D Is Near Record Highs
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Source: BEA
1.76%

22. Firms With More R&D Are Rewarded
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Note: R&D spending as reported by 239 of the largest global 500 companies since 2012. Data is
through May 2015.
Source: Bloomberg, Matthew A. Winkler
251%
avg growth*
69%
avg growth
36%
avg growth
-8%
avg growth

23. Thank You For Listening
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