Household Consumptionn and Wage Trends

Source: "A workers' manifesto for China,"
The Economist, October 11th 2007.

China has seen the growth of its gross domestic product accompanied by a reduction of the portion of GDP going to wages and going to private consumption. The Economist attributes this to China's labor surplus and to its capital intensive growth, which in turn it attributes to the ability of state owned companies to retain earnings for investment in productive plant, to the small amount of private ownership of industry and the weakness of the owners in appropriating profits, and to the government's policy of keeping the value of the yuan low. It occurs to me that the policies maintain China's competitive advantage in international trade of low labor costs.

Many countries have seen a fall in the share of labor income in recent years, but nowhere has the drop been as huge as in China.....

In America, the fall in the share of labor income in recent years has been offset by rising investment income, so total household income has stayed fairly steady as a portion of GDP.

Comment: Am I correct in inferring that the American experience -- fall in wages and increase in return to household investment -- means that the rich who have household wealth invested in productive enterprises are getting more of the pie while the working poor are getting less? I think that that is consistent with the increasing disparity in income and wealth in the United States. JAD