Corporate Profits
US corporate profits reached 12.0% of GDP in 2023 — among the highest readings in the post-WW2 era and roughly 3 percentage points above the long-run average. S&P 500 operating margins exceed 12% (vs ~7% pre-2000). The persistent gap between profit share and labour share has become one of the central macroeconomic debates of the past decade.
Key insights
Profit share is at a structural high
Corporate profits as a share of US GDP averaged 7–8% from 1947 to 2000. They moved up to 9–10% in the 2000s and to 11–13% in the 2020s. The increase is broad-based across sectors but concentrated in high-IP, high-scale industries (tech, pharma, finance). The labour share fell roughly in step — from 63% (1970) to 57% (2020).
Multiple explanations, no single dominant one
Leading candidates: (1) increased market concentration — fewer firms, higher markups (De Loecker-Eeckhout 2017); (2) globalization shifting bargaining power from labour to capital; (3) intangibles-heavy economy where IP rents accrue to capital owners; (4) declining union density; (5) measurement issues with intangibles depreciation. Empirical support for each is partial; the relative weights are contested.
Tax has moved opposite to profits
US statutory corporate tax fell from 46% (1986) to 35% (1988) to 21% (TCJA 2018). Effective rates fell further through depreciation and credits. Through 2024 the OECD Pillar Two 15% minimum has put a floor under effective rates for the largest multinationals — but the 50-year direction has been clearly downward, contributing to higher after-tax profits relative to GDP.
US corporate profits / GDP 1947–2024
NIPA corporate profits with IVA and CCadj, % of nominal GDP
Key Finding: Stable at 7-8% for 50 years, then a sustained step-up to 11-13% since 2010.
US labor share of national income 1947–2024
Compensation of employees / national income, %
Key Finding: Labor share fell ~6pp since 1970. The fall is closely mirrored by the rise in corporate profits share.
Methodology & caveats
Profits definitions
Multiple measures: NIPA corporate profits (broadest, all incorporated businesses), S&P 500 operating profits (large cap public, excludes financial-engineering items), reported earnings (GAAP, includes stock-based comp), adjusted earnings (excludes one-time items). The narrowest definitions overstate profitability; the broadest are most comparable across time.
After-tax vs pre-tax
Pre-tax profit margins reflect operating efficiency. After-tax profit margins reflect operating efficiency plus tax policy. The post-1980 rise in after-tax margins is partly explained by falling corporate tax rates. The pre-tax margin rise (smaller but real) requires explanations from market structure and labour bargaining power.
Intangibles and measurement
Modern firms invest heavily in intangibles (software, IP, organisational capital, brand) which are imperfectly captured in national accounts. Some economists (Crouzet, Eberly 2020) argue that proper accounting for intangible depreciation would reduce measured profit margins; others find the adjustment small. The debate matters for the policy framing of profit-share trends.