While companies in the United States are posting record profits, the share of workers in prosperity is declining. Economist Diane Swonk speaks of a “sense of betrayal” – and warns of consequences for society, democracy, and the handling of AI.
What is the initial situation? A new analysis from the “Economic Compass” of the auditing and consulting firm KPMG shows a development,
- Corporate profits account for 15.85% of total US economic output, up from about 8% in 1982, according to the report.
- At the same time, the share of employee compensation in gross domestic product has fallen from 66.6% to 61.9%.
- According to the magazine Fortune (article behind a paywall), the gap between capital and labor is now larger than ever. The focus is therefore on the relative shift in distribution, rather than absolute wage cuts.
The experienced economic expert Diane Swonk has reviewed the study’s findings and is shocked. She even speaks of an “undercurrent of betrayal”.
Who is the expert? The analysis comes from Diane Swonk. She is Chief Economist and Managing Director at KPMG US, one of the largest auditing and consulting firms in the world. In her role, she evaluates macroeconomic developments for companies, investors, and policymakers.
In a social media post on LinkedIn, she writes (translated from English):
This diagram haunts me. A friend calls it the ‘Revolution Diagram’. Inequality creates social and economic instability.
Swonk’s statement refers to the graphic published in the report:
In her post, she explained that this loss of trust is observable worldwide and over several decades, particularly in the countries of the Global South.
For many, worse than expected
What does the economic reality look like? On paper, much seems stable: Inflation is cooling off after record highs in 2022 in the US, growth is holding up, and consumption is not collapsing (Statista). However, according to Swonk, the overall data conceals a growing divide.
According to Fortune, US consumer growth has been driven almost exclusively by the wealthiest 20% of households since the pandemic. For the bottom 80%, income in many areas is only enough to keep up with inflation. At the same time, living costs in areas such as housing, energy, insurance, or childcare continue to rise.
Swonk therefore speaks of an “undercurrent of betrayal” – something in the economic narrative has broken.
Once again, AI
What role does AI play in the uncertainty? In this already fragile situation, another uncertainty according to Swonk is bursting forth: artificial intelligence. According to the expert, CEOs are already pointing to AI to justify hiring freezes or layoffs – even before genuine productivity gains can be measured.
This may seem sensible in the short term, but it could be dangerous in the long run. Because when people get the impression that technological innovation primarily destroys jobs and exacerbates inequality, societal rejection of AI grows (KPMG).
Especially for industries such as tech and gaming, which heavily rely on automation and AI, this could become a problem.
Diane Swonk summarizes the analyses as follows:
The result is an economy that appears resilient but feels increasingly fragile. […] Growth has held up, yet the connective tissue that supports labor markets, investment, and global cooperation is fraying. Workers are more anxious, investors more herdlike, and markets … more vulnerable to shocks than headlines suggest.
The result is an economy that appears resilient, yet feels increasingly fragile. […] Growth has held up, but the connective tissue supporting labor markets, investments, and global cooperation is fraying. Workers are more anxious, investors behave more like a herd, and markets are more vulnerable to shocks than the headlines suggest.
Diane Swonk KPMG Economic Compass
The analyzed developments may not be directly transferable to the European sector or Germany, but are similar due to local developments (WSI & WSI)
The share of the economic pie is shifting in favor of companies in the long term, and AI is playing an amplifying role in this.
That many CEOs themselves admit that AI has not yet measurably changed productivity or employment fits into the picture. Nevertheless, the technology is already being used as a justification for harsh cuts. Why this discrepancy is critical and what it means for workers can be read here: Thousands of CEOs have just admitted that AI has no impact on employment or productivity
