Whenever liberals note that the rich are getting richer while everyone else is either treading water or sinking, or that profits are up while wages are down, or, worse yet, that profits are up because wages are down, those liberals are invariably accused by conservatives of fomenting class warfare.

Well, goodness knows, we at the Prospect would never stoop so low. We would, however, refer our readers to the July 11 “Eye on the Market” report by J.P. Morgan Chase Chief Investment Officer Michael Cembalest, which demonstrates conclusively that, well, profits are up because wages are down. (“Eye on the Market” is a newsletter that Chase circulates to its large investors.)

The subject of the July 11 report is corporate profits, in particular, the pre-tax profit margins of the S&P 500, the 500 largest publicly-traded companies based in the U.S. Those profit margins, you’ll be glad to know, are close to record highs, nearing 13 percent of company revenues - their highest levels since the mid-1960s. And since medical costs are far higher today than they were back then, how, you may wonder, have those companies climbed back to the profit margins of those earlier, lest costly, more innocent times?

To answer that question, Cembalest looked at the rise in profit margins “from peak to peak” - that is, from their highpoint in 2000, just before the dot-com bust, to their highpoint in 2007, just before the financial crisis. In those seven years, profit margins rose by roughly 1.3 percent - from just under 11 percent of the S&P 500’s revenues to just over 12 percent. (Today, after dipping in the months after the crash, they’re up to near 13 percent, as we noted above.)

Why did they increase from 2000 to 2007? “There are a lot of moving parts in the margin equation,” Cembalest notes, but “reductions in wages and benefits explain the majority of the net improvement in margins. [Emphasis is Cembalest’s.] This trend has continued; as we have shown several times over the last two years, U.S. labor compensation is now at a 50-year low relative to both company sales and U.S. GDP.”

According to Cembalest’s calculations, the reduction in wages and benefits as a percentage of company revenue is responsible for about 75 percent of the increase in those companies’ profit margins. You can read the report, complete with graphs and charts, here.

In other words, medical costs may be rising, but companies are passing those cost increases on to their workers - that is, if they covering their workers’ medical expenses at all. And wages increases? What are they?

Cembalest notes that bringing 2 billion Asians into the global labor force has had a downward effect on American workers’ wages. He neglects to note that the virtual elimination of unions from the private-sector economy has had a negative effect on wage and benefit levels, too. If no one represents workers when it comes time to divide up company revenues, those workers don’t come out very well. Wealth is redistributed from labor to capital.

I realize we’re getting dangerously close to fomenting class warfare here, but don’t blame us. We’re just reporting the view from J.P. Morgan Chase.