Union Leaders Always Talk about Getting Higher Wages at the Expense of Profits but That Is Impossible because Corporate Profits Are Around 6% of National Income after Taxes

Union leaders always talk about getting higher wages at the expense of profits. That is impossible: profits simply aren't big enough. About 80 percent of the total national income of the United States currently goes to pay the wages, salaries, and fringe benefits of workers. More than half of the rest goes to pay rent and interest on loans. Corporate profits--which is what union leaders always point to--total less than 10 percent of national income. And that is before taxes. After taxes, corporate profits are something like 6 percent of the national income. That hardly provides much leeway to finance higher wages, even if all profits were absorbed. And that would kill the goose that lays the golden eggs. The small margin of profit provides the incentive for investment in factories and machines, and for developing new products and methods. This investment, these innovations, have, over the years, raised the productivity of the worker and provided the wherewithal for higher and higher wages.

--Milton Friedman and Rose Friedman, Free to Choose: A Personal Statement (San Diego: Harcourt Brace and Company, 1990), 234.