The Productivity Slowdown and the Fall in the U.S. Rate of Profit, 1947-76

Abstract

I find that the general rate of profit in the United States economy remained fairly stable from 1947 to 1967 and then declined sharply between 1967 and 1976. I argue that the movement of the rate of profit over time is a result of two factors: (1) the rate of growth of labor productivity and (2) the rate of growth of the real wage. During the period from 1947 to 1967, the two moved in concert, while in the latter period real wage growth exceeded that of labor productivity. The decline in the profit rate after 1967 is thus a consequence of a profit squeeze, which in turn was induced primarily by the sharp slowdown in labor productivity growth. Though real wage growth also fell after 1967, it did not fall to the same degree, primarily because of large increases in social security contributions.