The Unsustainable Economy

Robert Reich (h/t Mark Thoma):

Payrolls used to account for almost 70 percent of the typical company’s costs. But one of the most striking legacies of the Great Recession has been the decline of full-time employment – as companies have substituted software or outsourced jobs abroad (courtesy of the Internet, making outsourcing more efficient than ever), or shifted them to contract workers also linked via Internet and software.
That’s why most of the gains from the productivity revolution are going to the owners of capital, while typical workers are either unemployed or underemployed, or else getting wages and benefits whose real value continues to drop. The portion of total income going to capital rather than labor is the highest since the 1920s.
Increasingly, the world belongs to those collecting capital gains.
They’re the ones who demanded and got massive tax cuts in 2001 and 2003, on the false promise that the gains would “trickle down” to everyone else in the form of more jobs and better wages.
They’re now advocating austerity economics, on the false basis that cuts in public spending – including education, infrastructure, and safety nets – will generate more “confidence” and “certainty” among lenders and investors, and also lead to more jobs and better wages.
None of this is sustainable, economically or socially.

The whole post is excellent.  The concept is pretty simple, and Henry Ford understood it when he started the $5 a day wage.  His employees had to be able to buy his cars.  I'm not sure why today's business elite don't understand the concept.  Trickle down just doesn't happen.  Today, the holders of capital pocket the fruits of the productivity increases of labor.  That can't continue at the current trend.