Comment on Corporate Profits in BC

Travis Fast

Yesterday I posted on the subject of corporate profits and their relationship to total labour income. Today I am simply throwing up this graph with the OHPs removed from the series in response to a little debate that seemed to be is unfolding over at the PEF blog.

BC along with Manitoba lead the non-oil having provinces (NOHPs) in the ratio of corporate profits to labour income (see graph below).

The Canadian average is higher than the other provinces owing to the massive ratios registered in the the OHPs. What is interesting, however, is that the ratios climb the steepest in Manitoba and BC. What needs to be kept in mind is that the trend in profits as a percent of labour income closely track profits as a percent of GDP. That is, the higher profits are as a percent of GDP; the higher profits tend to be as a percent of total labour income. However, the spread between the two metrics was at historical highs in 2006 both for the country as a whole and BC in particular. And if averages for the decades are taken one finds that the 2000s are without precedent in the previous five decades (see graph below). Although mention should be made that CIT as a percent of GDP seems to split the difference between 60-70 and 80-90 years in the 2000s. So it seems that the tax man is doing ok. That leaves labour income as the other major source of after tax profits.