Follow us:

Opinion Northwest

Join the informed writers of The Times' editorial board in lively discussions at our blog, Opinion Northwest.

September 13, 2013 at 7:05 AM

One economist on why labor’s share of income is falling

Nancy Ohanian / Tribune Media Services

Nancy Ohanian / Op Art

Labor’s declining share of U.S. income is cited in political discussion as if its meaning were obvious: that specific policies, such as the “neoliberalism” of the Reagan administration of 30 years ago, or favoritism toward corporate interests, had tilted the balance in favor of  capital, and that this is part of the growing inequality of American life.

Possibly. But at the Web page “Conversible Economist,” Timothy Taylor (author of “The Instant Economist”) throws some cold water on easy conclusions.

First off, the share of national income to “labor” includes the work of all people in paid work, including corporate CEOs. It includes not only their salaries but their benefits, including stock options. For the statisticians, everyone who works is doing “labor.” The inequality within labor is a different question.

The declining share to labor is about all wages and salaries, high and low, as a share of all income. Most national income still goes to labor, but the share has been drifting downward for several decades.

Taylor says the  trend  is not exclusive to the United States. It’s happening around the world. Writes Taylor: “Looking for a ‘cause’ based on some policy of Republicans or Democrats in the U.S. almost certainly misses the point.”

One possible explainer, Taylor says, is globalization, which he says has reduced the bargaining power of labor. (I’m not so sure of this. Globalization has reduced the bargaining power of less-skilled labor in wealthier countries. I think it has increased the bargaining power of labor in poorer countries. It has certainly been good for workers in China.)

As labor’s share (still the largest) contracts in America, other, smaller components of national income have risen: more company money spent on “short-lived capital” such as computers and software; increasing dividends to stockholders and rising profit levels generally. Some of that (the dividends?) may be accounted for by the increasing percentage of retired Americans living on pensions and investments.

(Hat tip: Tyler Cowen at Marginal Revolution.)

Comments | Topics: economy, labor


Advertising
The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited seattletimes.com access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Activate Subscriber Account ►