Where Has All The Money Gone – Pt. III, Not to You and Me

Part I showed the money going to corporate profits, not to the salaries of working people.  Part II showed that the finance sector has captured an increasing slice of the profit pie.  Here is a different look at where the money hasn’t gone.

The first graph shows Real GDP/capita and Real Disposable Income/Cap since 1950 on a log scale.  (Data through 2009, from The Census Bureau. Table 678 at the link.)

I’ve left the 50′s out of the argument (but not the graph,) as a courtesy to Ike, since his relative performance suffers due to the post war baby boom.  The population grew at an above normal rate for over a decade, and that skews the GDP/Cap data.

If you’ve been paying any attention to time series economic data, you know there are break points in almost any econ measure, somewhere in the vicinity of 1980.  I’ve added trend lines, breaking the data sets arbitrarily at 1980.  These trend lines here tell the same story – it’s deja vu all over again.  Pre-1980 trend lines start with 1960 data.  I stopped the post ’80 trend line data sets at 2007, to avoid the influence of The Great Recession, which would have have further deceased their slopes.

What I want to emphasize here is the difference between the two lines.  Though both have a knee, the Disposable Income break is much sharper.   Here is a graph of the difference between the two, linear scale.  And, BTW, this time I left the ’08 and ’09 data in the trend line determination. 

Well – since 1980(-ish) not only has GDP growth slowed, the amount captured in disposable income has decreased, quite dramatically.

That’s a whole lot of wealth that is NOT ending up in the hands of ordinary people.   Which is why it doesn’t get spent.  But that is another story.

An earlier version of this post was published at Retirement Blues, back in June.

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